Consumers have hardly any spare cash to spend after ten consecutive months of steep interest rate rises. Yet you would never know it if you visited an airport, where queues are sneaking out of the terminal building.

These contradictions exist because of the stifled freedoms and pent-up savings Australians accumulated during the COVID-19 lockdowns.

Consumers just want to have some fun now.

Here are two ASX shares to buy that could benefit from this theme:

International travellers are back

Wilson Asset Management equities dealer Cooper Rogers likes the look of Experience Co Ltd (ASX: EXP).

"It's benefiting from the recovery of the international traveller," Rogers said on a Wilson video.

"We're seeing increased spend on experiences, rather than goods, particularly from our Chinese and Indian travellers. We expect that to really bode well for Experience Co."

The Experience Co share price has dropped 8.3% over the 12 months, but it has gained a handsome 14.6% since the start of 2023.

According to Cooper, there is one particular business unit that's going gangbusters.

"The skydive division is the one you want to look at. It's got massive operational leverage and with those increased numbers coming back, a lot of that incremental revenue is going to drop through the bottom line," he said.

"EXP is a buy for us."

Even back in 2021, in the midst of the COVID-19 delta lockdown, one expert predicted a boom two years later for this company.

"When international tourists return en masse, hopefully in 2023, it's our belief that this lean, restructured business will be significantly more profitable than ever before," said Forager Funds chief investment officer Steve Johnson.

Hungry for earnings upgrades

Another spending habit that endures even during tough economic conditions is fast food.

In fact, with consumers wanting to spend less eating out, the quick service restaurants become more appealing compared to fancy dining or even mid-price options.

This is why Wilson senior equity analyst Sam Koch considers Restaurant Brands New Zealand Ltd (ASX: RBD) a buy at the moment.

"If you've been to a KFC in NSW recently, you definitely would have been helping our holding."

As well as the KFC brand, the franchisor operates Pizza Hut, Carl's Jr and Taco Bell outlets across New Zealand, Australia and US Pacific territories.

"What we're really attracted to is the fact that whilst input cost inflation has impacted their business…, we see that troughing and actually recovering from here," said Koch.

"And you saw that in the last result."

The stock fell off a cliff late last year, resulting in a current share price that's less than half what it was six months ago.

This gives investors a buying opportunity, according to Koch.

"Earnings upgrades and deploying excess capital are the catalysts we're looking for tos ee a re-rate back to the prior multiple that it traded on."

The post Skydive then fried chicken: 2 ASX shares to party through an economic downturn appeared first on The Motley Fool Australia.

The Alliance Aviation Services Ltd (ASX: AQZ) share price is down nearly 9% since market close on 31 December. In the same time frame, Apollo Tourism & Leisure Ltd (ASX: ATL) also fell nearly 9% and Experience Co Ltd (ASX: EXP) descended nearly 3%.

In comparison Qantas Airways Limited (ASX: QAN) has soared nearly 8% since 31 December, Webjet Limited (ASX: WEB) has surged nearly 18% and Flight Centre Travel Group Ltd (ASX: FLT) has also climbed 18%.

Omicron variant woes

Alliance Aviation is a Queensland airline operating both domestic and international flights in the mining, government, tourism, corporate, and private sectors.

In its HY 1FY22 results released after the market closed on Wednesday, this ASX travel share reported COVID-19 had caused a "significant ongoing delay" to its wet lease deployment. Alliance Aviation reported an underlying profit before tax of $20.7 million, a $6 million decline. The Alliance Aviation share price fell by 5% the following day.

Commenting on the results, Alliance managing director Scott McMillan said:

It is well known that there have been numerous impacts on the national economy brought about by COVID-19 and various government responses. As a result, the company has suffered a delay on wet lease flying activity.

Alliance maintains a very confident outlook and is of the view that significant additional flying will commence in April this year.

Alliance will continue to invest in fleet, equipment, spare parts and personnel to ensure the company has the required capacity to satisfy its contracted wet lease routes and other future growth post COVID-19.

Apollo and Experience have not released any price-sensitive news to the market this year. However, COVID-19 Omicron travel disruptions appear to have impacted investor sentiment.

Apollo is an Australian tourism leisure company operating in New Zealand, North America, Germany, the UK, and Ireland. Meanwhile, Experience is an adventure tourism and leisure company offering fun activities including sky-diving, reef and rainforest tours and island day trips.

Could better days be ahead?

Despite the tough start to the year, Experience and Apollo have made major gains this week on the back of the international borders opening. The Experience Co share price has surged 6% since the market closed on 4 February, while Apollo has gained nearly 11%.

As Motley Fool Australia reported this week, Australia's international borders will open to tourists on February 21 which could benefit ASX travel shares.

Forager Funds management analyst Alex Shevelev said tourism operators will now have more confidence to prepare for international arrivals. He added:

Companies like skydive and Great Barrier Reef tour operator Experience Co and recreational vehicle owners Tourism Holdings (NZE: THL) and Apollo have struggled through the COVID travel decimation for two years while working to improve their businesses.

When tourists return they will be well positioned to finally benefit.

While the recovery will be gradual, the industry will be hoping that the initial trickle of tourists will be followed by a torrent of arrivals. Importantly, many operators have lowered their cost bases and will be more profitable when arrivals approach pre-COVID levels.

ASX travel shares summary

The Alliance Aviation share price has slipped 14% over the past year while Apollo has skyrocketed 69%. Meanwhile, Experience has surged 82% in the last 52 weeks.

For perspective, the S&P/ASX 200 Index (ASX: XJO) has returned 5% over the past year.

The post Why are some ASX travel shares recovering slower than others? appeared first on The Motley Fool Australia.

Few ASX investors will forget the 33% fall in the All Ordinaries Index (ASX: XAO) from late February through to late March 2020.

Since then, many ASX shares have rocketed back, propelling the All Ords back above pre-COVID levels.

But with international borders having remained all but shuttered, ASX tourism shares have broadly lagged behind that recovery.

But that all may be changing.

Yesterday the government reported that Australia's international borders will reopen to all fully vaccinated travellers commencing on 21 February.

Well positioned to finally benefit

Commenting on the lifting of border restrictions and the impact on ASX shares in the tourism sectors, Alex Shevelev, senior analyst at Forager Funds Management, said:

This move continues the reopening of Australian borders to the world. Tourism operators, large and small, will now have more confidence to begin preparing for international arrivals. While the recovery will be gradual, the industry will be hoping that the initial trickle of tourists will be followed by a torrent of arrivals.

Shevelev pointed to cost cutting measures undertaken by many of the companies in the sector as potentially boosting their profit margins.

"Importantly, many operators have lowered their cost bases and will be more profitable when arrivals approach pre-COVID levels," he said.

So which ASX shares are looking set to benefit?

According to Shevelev:

Companies like skydive and Great Barrier Reef tour operator Experience Co Ltd (ASX: EXP) … and Apollo Tourism & Leisure Ltd (ASX: ATL) have struggled through the COVID travel decimation for 2 years while working to improve their businesses. When tourists return, they will be well positioned to finally benefit.

How have these 2 ASX shares been performing?

The Apollo Tourism share price is up 47% over the past 12 months, but has fallen 17% so far in the new year.

Experience shares have gained 89% over the last 12 months and are flat so far in 2022.

As international tourists return to Australia, both ASX shares, as Shevelev says, look well positioned.

The post 2 ASX shares primed for Australia's reopening: fund manager appeared first on The Motley Fool Australia.

With more than half of Australia's population in coronavirus lockdown, you're likely not the only one missing a holiday to an exotic location.

So you'd reckon ASX travel shares would be a good bet, right? Surely when border closures lift, the pent-up demand will be a bonanza?

No, because Mr Market isn't an idiot.

Mr Market is pretty smart most of the time

Forager Funds chief investment officer Steve Johnson likes to remind everyone of a character from Ben Graham's classic book The Intelligent Investor.

Mr Market is an anthropomorphic metaphor for the share market.

"Some days Mr Market is depressed and wants to sell you his stocks at absurdly low prices," Johnson wrote in Money Magazine.

"On other days he is wildly optimistic and wants to buy your shares for a fortune."

But despite those occasional mood swings, he's actually pretty smart most times.

"He might be capable of irrational behaviour. We have seen plenty of that over the past 18 months. But he's not stupid," said Johnson.

"In fact, most of the time, Mr Market is an incredibly prescient character."

Mr Market already knows travel will recover

Why is Mr Market so smart? It's because stock prices are formed as a result of "hundreds of thousands" of investors doing their own analysis with all the information available.

It's the old efficient market hypothesis.

"There's plenty of research, best summarised in James Surowiecki in his book The Wisdom of Crowds, showing that the crowd gets it right far more often than any individual expert," Johnson said.

"As a general rule, you won't make any money predicting things that Mr Market already knows. And a travel recovery is the perfect example."

He took travel shares Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB) as examples of this.

"Travel is going to recover, but the market prices of these companies already assume that this is the case," said Johnson.

"The total market value of online travel agent Webjet, for example, is higher than it was prior to any mention of COVID-19. Flight Centre, too, is trading back near peak valuation levels."

But here are 2 shares with structural advantages

However, Johnson reckons his funds have found 2 lesser-known travel shares that aren't just relying on recovery in tourism to boost their fortunes.

"Successful investments… don't just require an insight. They require an insight that is unique."

They are adventure tourism provider Experience Co Ltd (ASX: EXP) and recreation vehicle rental company Apollo Tourism & Leisure Ltd (ASX: ATL).

Johnson's team bought into Experience Co several years ago when it was experiencing financial difficulties.

"Previous management made a number of large investments in far north Queensland which predictably soured. The share price tumbled and we started buying some shares."

But with new leadership at the helm, net debt has been slashed from $30 million to $2 million. This allowed the business to endure bushfires and COVID-19 without raising new cash.

"Experience Co is surviving off domestic tourism alone. And the share price, too, has recovered to the levels of early 2020," said Johnson.

"But when international tourists return en masse, hopefully in 2023, it's our belief that this lean, restructured business will be significantly more profitable than ever before."

The thesis for Apollo is similar, he added.

"Mr Market is anticipating a recovery, but he's underestimating the amount of structural change both companies have made to their businesses."

With the market so inflated now compared to a year ago, it's harder to find gems that Mr Market hasn't woken up to.

"There are pockets of opportunities. Most of our Australian Fund portfolio consists of businesses that we think have made permanent structural improvements that have been masked by the impact of COVID. But most prices today reflect a fairly sensible view of the future," Johnson said. 

"He will get depressed again, but for now Mr Market should be getting the respect that he deserves."

The post 2 obscure ASX travel shares to soar after COVID-19 appeared first on The Motley Fool Australia.

But most stocks in that sector already have high valuations that have post-COVID recovery built in.

That's despite some, like Flight Centre Travel Group Ltd (ASX: FLT) and Webjet Limited (ASX: WEB), having to raise massive capital and debt just to survive.

But one fund manager has called out one ASX travel share he believes is in a better position now than before the pandemic.

Time for adventure

Australian adventure tourism provider Experience Co Ltd (ASX: EXP) intrigues Forager Funds senior analyst Alex Shevelev with its potential.

The company supplies experiences like sky-diving, rafting, canyoning, kayaking, helicopter and boat tours, snorkeling and diving, and hot air ballooning.  

Shevelev said the business went off the rails a tad before the coronavirus pandemic arrived.

"We had a management team that went on an acquisition spree in far north Queensland," he told a Forager video.

"A lot of those investments have had to be curtailed by the current management team, and they've [now] really got the business in good shape."

The Experience Co share price has remained flat since the start of the year, when it was trading for 24 cents. On Tuesday, the stock dropped 1.82% to sit at 27 cents at market close.

That's now roughly the same level as just before the COVID market crash in March 2020.

With the vaccine rollout bungled in Australia, Shevelev anticipated the world outside of New Zealanders could start arriving in Australia next year.

"The willingness of travellers to come to Australia will be a factor, but really that should start to restart sometime in 2022 and should give those businesses a cleaner 2023 financial year."

Despite the delays in inbound international tourism, Shevelev liked what the Experience Co executive was currently doing.

"They've got a focused plan and a strategy to recover again to earnings that were higher than pre-COVID."

An intriguing Kiwi business

Shevelev also mentioned New Zealand company Tourism Holdings Ltd as another travel share with huge post-pandemic potential. In fact, the stock is Forager's biggest travel holding currently.

From mid-2018 to the COVID-19 crash, its shares tumbled from NZ$6.76 to NZ$2.49.

According to Shevelev, there was one massive factor in its misfortunes.

"The US business was unable to sell the vehicles at quite the prices that they wanted because of an oversupply of vehicles."

After the pandemic arrived, people wanted to avoid public transport. Countries like Australia and the US saw demand for second-hand cars surge.

"A lot of people had sought second-hand vehicles in the US – and that market really cleared up," he said.

"It has an excellent management team. The business is really primed to actually take share and to recover to better levels of earnings than was expected prior [to COVID] because… they've really taken advantage of the downturn."

The post Here's one ASX travel share now stronger than before COVID appeared first on The Motley Fool Australia.

Today's price growth comes as the company announced its latest acquisitions.

Let's take a closer look at today's announcement and what it means for the Experience Co share price.

What's affecting the Experience Co share price?

In a statement to the ASX, Experience Co said it had acquired the business assets of Wild Bush Luxury and The Maria Island Walk. The company believes the purchases will allow it to expand into 'premium adventure'.

The purchase of Wild Bush Luxury will also see its founder, Charles Carlow, be in the employ of Experience Co. Wild Bush Luxury owns the Arkaba Walk and Homestead in the Flinders Range of South Australia and the Bamurru Plains in the Kakadu region of the Northern Territory. The Arkaba Homestead and Bamurru Plains are both members of Luxury Lodges of Australia.

The Maria Island Walk is located on its namesake, the Maria Island of Tasmania. Unlike Carlow, the founder of Maria Island Walk, Ian Johnstone, will not join Experience Co but rather retire.

In its statement, Experience Co said it believes its expansion into premium adventure will be fruitful in the short-term, as the COVID-19 pandemic subsides but international borders remain closed. If that is the case, it will be good news for the Experience Co share price.

Both purchases will be completed by June 2021 and cost $5.3 million, payable until April 2023. The purchase is being funded using existing cash reserves.

Stakeholder commentary

Experience Co CEO John O'Sullivan said of today's announcement:

During my time as Managing Director of Tourism Australia, I witnessed first-hand the increased demand by Australians and international visitors for our country's premium tourism experiences. We are delighted to welcome Wild Bush Luxury and The Maria Island Walk.

Wild Bush Luxury is an established business in a category with strong fundamentals and exciting growth potential that we look forward to extending to The Maria Island Walk. Domestic, nature-based tourism is going to be a key focus for our business into the future particularly in the near term with continued uncertainty on international borders.

Carlow added

I am delighted to be joining the Experience Co portfolio and working with the team to build out a premium adventure category through Wild Bush Luxury with a focus on conservation and nature-based experiences.

It is a great time to join Experience Co, with record booking levels ahead for the upcoming season and further opportunity when international markets open up. The shared values of a passion for adventure experiences, environmental sustainability and disciplined capital management are a natural fit and the right foundation to grow the business into the future.

Experience Co share price snapshot

Over the past 12 months, the Experience Co share price has increased 194.74%. Its current share price is only just below its 52-week record of 29 cents a share.

Experience Co has a market capitalisation of $152.8 million.

The post Experience Co (ASX:EXP) share price jumps 6% on latest update appeared first on The Motley Fool Australia.

One of the listed investment companies (LICs) in Naos' stable is called Naos Emerging Opportunities Company Ltd (ASX: NCC). It targets small stocks with market capitalisations under $250 million. This LIC generally invests in industrial companies.

Since the LIC's inception, its portfolio's investment performance after all operating expenses, but before fees and taxes, was 12.3% per annum to the end of February 2021.

Despite a negative impact from its holding of BTC Health Ltd (ASX: BTC), the Naos Emerging Opportunities Company investment portfolio managed to make a return of 4.3% in February 2021.

Naos attributed its good performance to the reports delivered by its holdings, including the below three which it still believes remain undervalued with catalysts that may eventuate during the rest of FY21.

Experience Co Ltd (ASX: EXP)

Experience is an adventure tourism company that offers experiences of tandem skydiving, indigenous experiences and tours to the Great Barrier Reef.

Naos said that the small ASX share released a highly commendable result with the business remaining profitable and cash flow positive in a challenging environment due to COVID-19 effects.

The fund manager has stated numerous times that it believes a significant amount of progress has been made by the current management team and that will have a positive impact on the future profitability of the business with the return of domestic tourism demand.

Initiatives by Experience include gross distribution agreements, corporate cost initiatives, new product offerings and asset base realisation. Naos believes that over the next two years, helped by small acquisitions, it can be a business that generates around $50 million of earnings before interest, tax, depreciation and amortisation (EBITDA).

Saunders International Ltd (ASX: SND)

Saunders International is a small ASX share that provides construction, maintenance and engineering services to the energy, resources and infrastructure sectors. Some of its clients include Sydney Water, the Australian Government, Lendlease Group (ASX: LLC) and Rio Tinto Limited (ASX: RIO).

Naos said that Saunders International probably released the strongest result in the Naos Emerging Opportunities Company portfolio.

The fund manager said that recent half-year results have shown losses or minimal profits. But in this report it made a "significant" profit with earnings before interest and tax (EBIT) of $4 million and declared an interim dividend for the first time in almost three years.

Saunders International managed to exceed its entire FY21 guidance in just the first six months of FY21.

The small ASX share's management has said that they don't see any slowdown in the financial performance of the business a with a new revised FY21 revenue target of $110 million to $110 million and EBIT margins of between 7% to 8%, which implies a stronger second half.

Naos believes the guidance may prove to be conservative with several industry tailwinds supporting the business for the next 12 months to three years. The fund manager said there could be opportunities that are the largest in the company's history.

The tailwinds include the federal government focus on domestic fuel storage capability, infrastructure spend with a particular focus on regional programs including bridge replacement, there are also numerous and significant opportunities within the defence sector.

Big River Industries Ltd (ASX: BRI)

Big River is involved in many different timber operations. It's a major manufacturer of softwood and hardwood formply and structural plywood products in Australia, a major seller of consumable formwork products in Australia, and it's a national merchant of timber and associated building products to local trade, medium sized and enterprise sized companies.

The timber business produced a strong result according to Naos, with EBITDA growing by 15% compared to the prior corresponding period, which wasn't affected by COVID-19.

The fund manager was excited by new information in the half-year result which Naos believes could potentially result in the small ASX share more than doubling its current annualised net profit after tax run rate of $6.2 million.

According to Naos, Big River Industries' acquisition of Timberwood remains on track with the company trading well and forecast to contribute around $3 million of net profit after tax based on the current run rate.

The net cash inflow resulting from the closure of the Wagga Wagga facility and subsequent relocation to Grafton is expected to be around $10 million with an addition to net profit of around $2.5 million. The fund manager thinks the economic backdrop could also help grow future earnings.

The post 3 exciting small ASX shares to watch after strong results appeared first on The Motley Fool Australia.

As the government looks set to introduce an airfare ticket subsidy to soften the blow, Qantas Airways Limited (ASX: QAN) and Flight Centre Travel Group Ltd (ASX: FLT) shares are both surging higher in morning trade. Experience Co Ltd (ASX: EXP) shares have failed to respond to the news and are currently trading nearly 2% lower. 

At the time of writing, the respective share prices of these companies are $5.35, $19.20 and 25 cents.

The federal government's new domestic tourism program

Announced last night, the government is set to introduce a $1.2 billion package aimed at the domestic tourism sector as it weens the industry off of wage subsidies.

The proposal would see domestic airline tickets cut by 50% to the following regional centres:

• The Gold Coast
• Cairns
• The Whitsundays
• The Sunshine Coast
• Alice Springs/Uluru
• Launceston
• Devonport
• Burnie
• Broome
• Avalon
• Merimbula
• Kangaroo Island

As The Guardian's political reporter, Amy Remeikis noted, most/if not all the towns listed are in marginal federal electorates. 

What do these tourism areas all have in common? Oh nothing. Just that they're seats the government either wants to win, or needs to keep pic.twitter.com/W8hCpIzmUM

— Amy Remeikis (@AmyRemeikis) March 10, 2021

As a part of the package, Qantas and Virgin will need to provide monthly reports to the Commonwealth on international flight readiness.

Professor Holden does not believe the package is adequate.

"It's something but not nearly enough in my view." He told this reporter.

"It relies on a strong response from the rest of Australians and that is highly uncertain. It's very different [to] the kind of guarantee provided by JobKeeper."

Professor Holden warned generally about the government's proclivity for austerity.

"[The Morrison government's] fiscal policy has too much emphasis on a budget surplus sooner rather than later." "The economy [pre-pandemic] was not good. Per capita GDP growth was 0, inflation was below [RBA targets], and wages were stagnating."

"Until the economy can really open up – we can't be withdrawing fiscal policy. If anything, we should see more [government spending]."

Those in the tourism sector feel likewise. Talking to the Australian Financial Review (AFR), Tourism Australia and Experience Co. chair Bob East said he would prefer direct grants or a continuation of the subsidy.

"I'd love to say I'm hearing there will be direct grants for tourism operators, but I'm not."

Part of the scheme also entails granting small and medium enterprises loans of up to $5 million.

Quoted in the AFR, Queensland Tourism Industry Council chief executive Daniel Gschwind says debt is the last thing these businesses want.

"We can't get excited about no interest or low interest loans," he said. "I can't see a struggling tourism operator taking on more debt. The appetite for more loans is very low."

The head of Accor Group Australia told ABC Radio National the proposal wouldn't "deliver in a material way for the industry as a whole."

We've asked the head of Australia's biggest hotel group @Accor whether the Government's cut-price flights will save the tourism sector? "Sadly I don't think it will. It won't deliver in a material way for the industry as a whole." @RNBreakfast #auspol

— Julia Holman (@JulesHolman) March 10, 2021

Others are predicting up to 100,000 jobs may disappear when the $1,200 a fortnight wage subsidy ends.

Australia's slow vaccine rollout

The Sydney Morning Herald (SMH)'s COVID vaccine tracker says around 86,000 vaccines have been administered in Australia as of writing. This is way down on Scott Morrison's target of having 4 million arms jabbed by the end of this month.

Professor Holden says the economy cannot recover, and therefore JobKeeper cannot be withdrawn until we have a critical mass of vaccinations.

As we've seen many times over the past year, states and territories are ready to close borders on a moment's notice.

"I worry about [another Melbourne/Northern Beaches like outbreak] a lot. We need to build confidence. "Every lockdown shatters business and consumer confidence." "It's incredibly shaky as it is now."

"We can't have [federal Health Minister] Greg Hunt saying we need to wait and see if the vaccine is killing people. That doesn't build confidence."

Share price snapshots

Qantas shares reached a 52-week low of $2.03 in March last year. Since then, the Qantas share price has rocketed 163%. Flight Centre shares reached a 12-month low at the same time – $8.56. While it's more than doubled since then, it is still lower than its pre-pandemic price of $21.59.

The Experience Co share price one-year low was 3.3 cents. At their current valuation, Experience Co shares have gained more than 650% since then.

The respective market capitalisations of these companies are around $9.8 billion, $3.6 billion, and $141.7 million.

The post Qantas (ASX:QAN) share price rises despite fears tourism will struggle after JobKeeper appeared first on The Motley Fool Australia.

What is Naos Asset Management's investment approach?

Naos is led by chief investment officer (CIO) Sebastian Evans. NAOS Ex-50 Opportunities Company Ltd (ASX: NAC) is one of the listed investment companies (LIC) operated by Naos.

That particular LIC generally looks at businesses with market capitalisations between $250 million and $6 billion. That's what Naos deems to be a 'mid-cap'.

The fund manager has a number of investment focuses. It looks for businesses that are good value with long term growth potential. With its portfolio, Naos believes it's better to have a quality portfolio rather than numerous holdings. That's why it only holds around 10 positions in each fund, with each ASX share representing a high-conviction position.

Naos invests in the small cap ASX shares and mid caps for the long-term. It considers the performance and the liquidity of its positions whilst ignoring the index. Performance can sometimes be quite variable when compared to the index.

It looks to invest purely in industrial companies whilst also considering the ESG factors (environmental, social and governance).

Here are three ASX shares worth owning, according to Naos:

Objective Corporation Limited (ASX: OCL)

Naos describes Objective Corporation as a business that's founder led and provides specialist software for regulated industries such as government, councils and financial services. The fundie says that Objective has mission critical software, built on providing improved governance, service delivery and workflow-process efficiency.

The fund manager says Objective Corporation is a global leader in the space, with over 1,000 customers and 10 product offerings across many countries.

The ASX share held its annual general meeting recently and released a detailed presentation. Whilst there were no new comments provided, Naos thought there were a few interesting comments that supported the view of long-term growth of the business. One comment related to FY21 guidance being reiterated for "material growth in revenue and profitability". Another comment was about how acquisitions remain a core part of the strategy. Finally, more detail was provided about how the integration of iTree, together with the recent product launches of Gov365 and Objective Build is progressing.

Naos said that with annualised recurring revenue (ARR) now standing at $53 million, the fundie believes the ASX share is on target to achieve, or even exceed, the long term ARR ambition of more than $127 million.

Eureka Group Holdings Ltd (ASX: EGH)

According to Naos, Eureka Group is a provider of quality and affordable rental accommodation for independent seniors within a community environment. Eureka owns 30 villages and manages a further nine villages with a total of more than 2,000 places across Queensland, Tasmania, South Australia, Victoria and New South Wales.

Eureka recently held its annual general meeting (AGM) and the ASX share gave a market update in early November which included FY21 earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of $9.8 million to $10.2 million. This equates to growth of 21% to 26% compared to the prior corresponding period. Occupancy has remained above 95% and the business still wants to sell non-core assets, which will provide the funding for organic growth and acquisition opportunities that Eureka is targeting.

The fund manager believes Eureka has multiple levers that can be pulled to help earnings growth at a significant rate going forward, and when overlaid with the current industry tailwinds, Naos thinks Eureka will be highly attractive to investors, particularly in this low interest environment as investors seek returns.

Experience Co Ltd (ASX: EXP)

Experience Co is a business that is one of the largest adventure tourism businesses with experiences like tandem skydiving, indigenous experiences and tours to the Great Barrier Reef. The company currently has numerous locations throughout Australia and New Zealand.

Naos said that with many of the domestic state borders being opened, or expected to be opened in the near future, Experience Co will have a strong tailwind from this leading into the key summer holiday season.

The Australian operations are currently operating at between 30% to 40% capacity compared to the prior corresponding period. Naos believes there is significant earnings potential from greater domestic demand which may lead to greater profit leverage. The fund manager thinks Experience Co will emerge with a much more efficient business, lower costs and a greatly reduced commission model to third party sellers which may result in EBITDA being significantly higher than the results it generated under the previous management's strategy.

The post 3 ASX shares rated as buys by fundie appeared first on The Motley Fool Australia.

The Motley Fool chats with fund managers so that you can get an insight into how the professionals think. In this edition, Cyan Investment Management director and portfolio manager, Dean Fergie, reveals two Aussie businesses that are winning big contracts, and some ASX-listed foreign companies to avoid.

The Motley Fool: What's your fund's philosophy?

DF: Our philosophy is to find smaller, less well-known stocks that are commercially proven but not well-recognised and likely to go through a sustained growth phase for the next 3 to 5 years or more. 

We tend to avoid really speculative businesses and businesses that are mature, and look for the next ones that are up-and-coming.

MF: So is it fair to say that your investments are focused on smaller cap?

DF: Yeah. Our philosophy is that the bigger you get, the harder it is to grow at double digit-plus rates. So by definition you have to look down at the spine of the market.

COVID-19 crash 

MF: How's the fund going this year with all the volatility?

DF: The short answer is volatile. We took a lot of pain when COVID first came out and then have retraced some of that and more since that time.

MF: Did you manage to buy anything during the March dip?

DF: We bought quite a few stocks. I think we played it reasonably well. But you can probably always do a little bit better in hindsight. 

What I saw is the stocks or the funds that were really defensively positioned in March did really, really well. Then in April and May they all did relatively poorly and vice versa. 

We made some smart investment positions, but did we put all our money into that cohort of tech stocks that have done exceptionally well? No, unfortunately not.

I think more than ever it's a really important time to be diversified. Because if you've got all your stocks in a really defensive basket, or a really aggressive basket, or technology-laden, or value-based, there'll be times when you'll do incredibly well and times where you'll do incredibly poorly. And it's very uncertain when those periods are going to be. 

Buying and selling 

MF: What do you look at closely when considering buying a share?

DF: The ability to scale… Obviously that leads to technology businesses, specifically software, but also businesses that can grow organically or that are embarking on potentially a new kind of business angle that's not largely been explored already. 

We look at a lot of tech businesses, financial services, and we're quite big in education. We've dabbled quite successfully in some food businesses — one of our early investments that was successful was Bellamy's Australia Limited (ASX: BAL). Professional services as well.

MF: What triggers you to sell a share?

DF: Disappointment in terms of management execution, or potentially if there's new competitors to come into the market, or just companies [that] disappoint on an earnings front. 

If you think you're losing money on something, or if something's changed, just sell out. Take the capital loss and move into something that's more successful. That's the way we look at things.

MF: Even if the company is doing reasonably well, would you sell out because it's reached a certain target that you might have set for yourself?

DF: Yeah, there's an element of that. I guess what happens is that if you have stocks that become very successful, they become quite a large part of your portfolio. We have a hard limit of not having any one position more than 10% of our portfolio. So when you have businesses that rise exponentially, you're forced to sell them down. I think that's sensible. 

One of the beauties of stocks is that you have these incremental changes to your holdings. It's not like buying a house where you're either all in or all out. You can fine-tune your exposure to stocks relatively easily and cost-effectively. 

That's one of the great advantages of the stock market that I think a lot of investors don't really take advantage of. They want to buy everything at the bottom and sell everything at the top, and that's unrealistic. 

So we just buy more stocks at lower prices and sell more of them at higher prices, and not try and be too binomial about those decisions.

What's coming up?

MF: Where do you think the world is heading at the moment?

DF: I wouldn't be alone in saying that the broader economy has got a lot of challenges ahead. But what we're seeing in 2020 is that there's been a massive disconnect between economic outlook and the stock market. They just don't reflect each other anymore. 

A lot of that has actually been driven by incredibly low interest rates. Just emotionally, investors don't want to leave their money in any kind of defensive asset class if it's not giving them any return. 

So every opportunity where there's a market dip, they've looked at getting into the stock market. And even the biggest funds, the pension funds, and massive super funds tend to be allocating more towards equities. On top of that, you've got a massive amount of retail day traders in the market sending stocks sky high with massive volumes. 

So whilst I think the near-term economic outlook does look challenging, I don't think it's necessarily a bad thing for the stock market because even if you've got businesses that are earning 3% or 4% earnings yields and potentially 1% or 2% dividend yield fully franked, that's a better outcome, if you're prepared to take the capital risk, than leaving your money in the bank right now.

At the end of the day, that's what drives the stock market, demand versus supply.

MF: That situation you just described, do you think it's a fundamental structural change that's here to stay? Or do you think the situation will return back to "normal"?

DF: It will depend on the direction of interest rates. They clearly can't go very much lower unless they go negative and I don't think that's looking like a realistic outcome. 

I would suggest that a lot of that rotation into stocks has already happened. The All Ordinaries Index (ASX: XAO) is not back to pre-COVID highs, but it almost is. Certainly the smaller end, the Emerging Companies Index, is 10% above where it was pre-COVID. 

So you're seeing a lot of money flow back into the stock market really, really aggressively. And it almost creates its own demand. It's almost like this elastic band in that you rail against the bullishness of the stock market till it runs so far that you just give up and cave in — and go and buy stocks like everyone else. 

But there are patches of the market that look crazily overvalued.

When we saw a potential vaccine come out and all those tech stocks tumble within the space of a day, I think that was a little bit of a warning sign — a canary in the coal mine — that it just can't go on forever. 

Sooner or later, all investors are going to come back to buying things on fundamentals. 

Overrated and underrated shares

MF: What's your most underrated stock at the moment?

DF: One stock that we've held for a while and just hasn't performed like we expected is a business called Quickstep Holdings Limited (ASX: QHL), which is an advanced carbon fibre manufacturer. 

They do a lot of work for the defence force… It's capped at sort of $60 million [market capitalisation], it does about $80 million in revenue, and is moderately profitable. 

They just penned a deal to buy a maintenance division of Boeing Co (NYSE: BA), which will add to their revenue. We look at that on just basic earnings multiples and revenue multiples and think it looks really cheap. 

Then when you look at it versus a number of these other advanced manufacturers in terms of like Titomic Ltd (ASX: TTT), AML3D Ltd (ASX: AL3), and Amaero International Ltd (ASX: 3DA)… it just looks ridiculously good value. So that's one we like. 

It's been a long slog for them to get where they are now, but they've got a lot of cash on their balance sheet. Contracts with global defence force businesses like Boeing, Lockheed Martin Corporation (NYSE: LMT) and Northrop Grumman Corporation (NYSE: NOC) — I just think it looks like a no-brainer in terms of a business to buy into, but the market just hasn't recognised it yet.

Another one that's going great guns at the moment is a hospital software provider called Alcidion Group Ltd (ASX: ALC). Again, they just signed a $9 million deal with a hospital in the UK. And they've got more than 20 million bucks in recurring revenue. They're getting very close to profitability. Global rollout. Reference sites.

MF: I see that one's spiked up this month?

DF: Yeah. It hasn't really done too much in the last 6 to 12 months. Everyone got pretty excited, went from I think about 6 cents to about 30, and has sort of come back.

With a lot of stocks, they run on momentum and then they kind of lose a bit of momentum and people get bored and they want to be on the next big thing regardless of what it is. So often you need a new contract or something new to excite people about it. 

I think [Alcidion]'s one of these businesses that just hasn't been big on announcing new contracts, but they've signed some that are really, really significant for a business that size. 

And you've seen that with the success of companies such as Pro Medicus Limited (ASX: PME) and the like. When those businesses get some success, certainly overseas, they can become very, very big businesses. 

MF: What do you think is the most overrated stock at the moment?

DF: I look at businesses like these Israeli technology ones like Weebit Nano Ltd (ASX: WBT), Dotz Nano Ltd (ASX: DTZ), Audio Pixels Holdings Ltd (ASX: AKP). 

They're all speculative businesses that are doing nothing in terms of revenue, keep sucking in investor cash, and don't make money. And they've got valuations in the hundreds of millions of dollars and I'm not necessarily sure that they've got anything particularly special. 

I'd say the same thing about businesses like Titomic — [they] don't really do much and they're still capped at a couple of hundred million bucks.

MF: Do you think there's a phenomenon these days of amateur investors egging each other on in internet forums?

DF: Oh, no doubt. A lot of investors will buy stocks because they're going up. It's pure speculation, but they just want to be in something because they think it'll be worth more next week than this week, not because they understand it, not because they think they're buying it at a cheap price, just simply because it's going up. 

You look at Kogan.com Ltd (ASX: KGN), Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY) as well. They've all got good business models, but the selling product online is not necessarily a business that's got huge barriers to entry. I mean, anyone can open up a Shopify store. 

Sure, you don't have the customer base, you don't have the reputation, you don't have the buying power, but they're not businesses that I think should be trading on 6 times sales and 100 times earnings. I can't see them scaling up any time soon. 

There's a lot out there that I would be very, very wary of on a purely valuation perspective.

Looking back

MF: Which stock are you most proud of from a past purchase?

DF: Afterpay Ltd (ASX: APT) is the obvious one. 

MF: Do you still hold it?

DF: No, we sold out a while ago. 

One that we bought quite a while ago is RAIZ Invest Ltd (ASX: RZI). That one did struggle for a while. It's an online investing platform — I think they offer a really, really good product. Their app's got great functionality. 

They're getting a lot of long-term customers — more people are interested in investing. I think that's a business that's got tailwinds from the structural change that people want to think more about investing in stock markets and not leave their money in the bank. 

Secondly, it's a technology play and it's getting good growth both here and they're looking to launch overseas as well. So that's one that I think will go really well. 

But probably our two biggest winners we've ever had are Afterpay and Bellamy's and, oddly enough, we made a lot of money out of Experience Co Ltd (ASX: EXP) for a while before it kind of went really badly.

Stocks never go up and down in a straight line. And that's one where we got in early and managed to get out enough of them that we ended up getting a good return for our portfolio over a period where it went up 2 or 3 times before they… struggled a little bit.

MF: Has COVID-19 changed or altered your investment methods at all?

DF: What's happened is that investors, if you think of yourself as a traditional strong "numbers and valuation" player… then you would have left a hell of a lot of money on the table. 

I think you're naive to think that the market is just driven by valuations. It's not. It's driven by sentiment, excitement, enthusiasm, momentum, those sorts of things. And they will drive stocks much higher than might be, in your view, intrinsic value. And they can all disappear overnight. 

So you've got to appreciate that there's a lot of other drivers in the market other than pure financial fundamentals and try and kind of second guess where other investors are going to either see risk or opportunity in the market — and try and take advantage of that.

Advice for your readers is try and blend a little bit of fundamental analysis with what you see as an opportunity and excitement towards positions. 

Probably the highest profile stock float this year has been Adore Beauty because it's a mainstream business. A lot of females know about it. It's run by a female founder. It's a great news story. 

But it was, we thought… incredibly expensive. 

People I saw were saying "Oh look, you know, there's a girl… and she wants to buy shares because she thinks it's a really good company." 

You've got to put a framework of what you're buying around it. What are you getting for your money? And if you don't know that, you shouldn't really be investing because it's not that straightforward.

The post This cheap ASX share is supplying US giants: fundie appeared first on The Motley Fool Australia.

Experience provides adventure tourism and leisure activities in key tourist destinations in Australia and New Zealand. Some of these experiences include tandem skydiving, Great Barrier Reef snorkeling, helicopter and diving tours and hot air ballooning.

Experience's FY 2020 challenges

The Experience share price has been battered this year as it suffered from the impacts of Australia's bushfires and the COVID-19 pandemic.

CEO John O'Sullivan said 2020 had presented "the most challenging conditions" in the company's 20-year history.

"The Australian tourism industry was already on the back foot from the Australian bushfires, however it was brought to an immediate halt upon the emergence of COVID-19," he said.

So how did the company perform in FY 2020

Experience generated $87.4 million from continuing operations. This was a 32.8% decline on the previous year, largely driven by COVID-19 and the bushfires. Underlying EBITDA fell even more drastically to $7.3 million – a 70% decrease. This included a second half loss of $1.8 million with allowance of bad debts.

The company posted a loss of $39.7 million for the year, falling from a $5.4 million profit the year before. As international customers make up 65% of Australian and 92% of the company's New Zealand operations, it is not hard to see the impact of coronavirus-related travel restrictions on business operations.

With tourism not expected to return to pre-pandemic levels until after FY24, net debt is an important consideration as companies struggle to pay off large debts. Experience share holders will be happy that its net debt of $9.0 million has declined as a result of divestment in non-core assets. This has delivered approximately $22 million.

The Experience share price rocketed today, with most of the bad news likely to be already priced in. Cost-saving programs and rapid response to the pandemic have also mitigated the impact of such extreme adverse conditions.

Outlook for the Experience share price

Heading into FY21, Experience enters the recovery phase. Trading conditions will depend on pandemic developments and restrictions on domestic and international borders. Profitability is understandably one of the company's foremost concerns and as such it has implemented stringent cost-saving controls.

The Experience share price is on the rise as operations restart across the portfolio. Skydive locations have opened in all locations except for Victoria and Glenorchy (NZ). Furthermore, July trading has been encouraging, with underlying EBITDA breakeven for the first time since the return of operations. However, this is aided by the support provided by Jobkeeper and landlords.

The post Experience share price explodes on FY20 result appeared first on The Motley Fool Australia.

According to The Guardian reporting, the ABS is looking at Aussie spending habits during the coronavirus pandemic.

The latest survey, conducted in mid-June, is about what Australians are going to spend money on once restrictions are loosened again.

The Guardian quoted ABS head of Household Surveys, Michelle Marquardt, talking about people's spending intentions: "a majority expected to increase their spending on recreational activities (74%), eating out (74%), private transport (73%), personal care (70%), childcare (66%) and public transport (55%)."

What does this mean for ASX shares?

Well it's good to see that people do plan to spend more money when restrictions allow. It is spending that makes the economy tick.

Recreational activities could mean a lot of different things. There are plenty of shares this could be applicable to such as: Ardent Leisure Group Ltd (ASX: ALG), Experience Co Ltd (ASX: EXP), Crown Resorts Ltd (ASX: CWN), Event Hospitality and Entertainment Ltd (ASX: EVT), Ingenia Communities Group (ASX: INA), Star Entertainment Group Ltd (ASX: SGR), Sealink Travel Group Ltd (ASX: SLK) and Village Roadshow Ltd (ASX: VRL).

Eating out would probably benefit the food shares listed on the ASX like Domino's Pizza Enterprises Ltd. (ASX: DMP), Collins Foods Ltd (ASX: CKF), Retail Food Group Limited (ASX: RFG) and Redcape Hotel Group Pty Ltd (ASX: RDC).

You'd think that private transport would be good for shares like Ampol Ltd (ASX: AMP), Viva Energy Group Ltd (ASX: VEA) and Waypoint REIT Ltd (ASX: WPR).

Increased spending on personal care would be good for shares like BWX Ltd (ASX: BWX), McPherson's Ltd (ASX: MCP), Sigma Healthcare Ltd (ASX: SIG) and Australian Pharmaceutical Industries Ltd (ASX: API).

It also looks like it would be good news for childcare related shares like G8 Education Ltd (ASX: GEM), Think Childcare Ltd (ASX: TNK) and Arena REIT No 1 (ASX: ARF).

What about travel?

People are also asked about their travel intentions. The ABS survey revealed that 55% were planning to go on a domestic holiday while less than a third were planning an international holiday.

Of the people planning to take a domestic holiday, 20% intended to go within the following month and another 68% planned to go within the following six months. Most people aren't thinking about an international holiday in the short-term. Of people thinking about an overseas holiday, 44% were thinking about doing it within six to 12 months and 31% were thinking about taking the holiday more than a year in the future.

Shares like Webjet Limited (ASX: WEB), Flight Centre Travel Group Ltd (ASX: FLT), Qantas Airways Limited (ASX: QAN) and Sydney Airport Holdings Pty Ltd (ASX: SYD) are obviously being disrupted by COVID-19 right now, but it'll be pleasing for them that people are thinking about taking domestic holidays.

Do any of these ASX shares look like buys?

I think there's a case for many of the shares hit by COVID-19 if you think about the long-term. Shares should be long-term investments. What happens over the next 12 months shouldn't change your long­-term thinking about a business too much, unless it could go bust. I'm not sure about travel shares at today's prices. The rising case numbers in Melbourne have hurt the prospect of the country being completely COVID-19 free this year, and may limit travel between Melbourne and the rest of the country for a bit longer.

I do believe that shares like BWX, McPherson's, API and Ingenia could be ones to watch over the next couple of years. I'm quite excited by the prospect of the continuing international earnings growth for BWX and McPherson's.

The post ABS reveals which industries (and ASX shares) may rebound hard after COVID-19 appeared first on The Motley Fool Australia.

Experience Co is a provider of adventure tourism and leisure experiences in Australia and New Zealand. These experiences include skydiving, island day trips, and reef tours. The company's operations are located predominantly on the eastern seaboard of Australia from the Great Ocean Road in Victoria to Queensland's Port Douglas. It also has skydiving operations in Queenstown, New Zealand.

Despite getting off to an impressive start after listing in 2017, Experience Co shares haven't had the best run on the ASX to date – falling from around 88 cents in December 2017 on the back of weak tourism conditions, poor weather events, and the resignation of its CEO.

Why has the Experience Co share price bounced today?

This morning, Experience Co released a market update in regard to the impact of COVID-19 on its operations. The company had previously announced the indefinite suspension of all operations on 23 March.

According to today's release, operations have resumed at Experience Co's Queenstown skydiving drop zone. The company is also aiming to resume operations at a number of Australian-based drop zones during June.

On the whole, experiences will be activated on a breakeven basis, staged over the coming months in line with the relevant jurisdictional lifting of restrictions.

In terms of financial stability, the company believes it is well-positioned to sustain an extended period of hibernation with $10 million cash on its books as at 30 April 2020. It also has an additional $15 million undrawn capacity on its debt facility with National Bank of Australia Ltd (ASX: NAB) and facility agreement waivers in place in relation to covenant testing for the 30 June 2020 testing period.

Assuming operations are suspended and there are no material changes in market conditions, Experience Co is anticipating its minimum monthly net cash outflow to average approximately $1 million per month to 30 September 2020.

As for wages, the company has triggered job subsidy programs in both Australia and New Zealand. The respective programs have been implemented for 360 eligible employees in Australia and 78 employees in New Zealand. Meanwhile, senior executives and board members have taken a 30% reduction in remuneration until 30 June 2020.

Experience Co has also been supported by lease cost relief with the co-operation of its landlords. As a result, monthly lease expenses through a combination of waivers and deferrals have been reduced. This includes 100% rent relief for Ports North and fees and charges in its Great Barrier Reef business until 31 December 2020.

Looking forward, Experience Co noted the continuation of its strategy for business simplification. It described the divestment of its Hunter Valley and Byron Bay Ballooning businesses as "well progressed" and cited other surplus asset sales processes are ongoing.

Additionally, Experience Co highlighted that good headway has been made on business process projects. This includes implementing a new reservations system for the skydiving business and process improvements across corporate functions.

Management commentary

Commenting on today's update, CEO John O'Sullivan said:

"The EXP team has been working extremely hard to design and implement COVID-19 operational processes and procedures since the Australian and New Zealand Government regulations came into effect. We are cautiously excited about recommencing our operations all the while recognising that the emergence is likely to be protracted and will require a sustained level of resilience across the business. Our goal remains to maintain a viable business and balance sheet, positioning EXP for when conditions improve."

"At the time of suspending operations we noted that we were not in a position to forecast with any level of certainty the duration nor recovery profile from this pandemic. This remains the case and our continued strategy is to minimise short-term cash outflows," he added.

The post Why the Experience Co share price is flying 17% higher today appeared first on The Motley Fool Australia.

Experience Co is a provider of adventure tourism and leisure experiences in Australia and New Zealand. These experiences include tandem skydiving, Great Barrier Reef (GBR) snorkeling, helicopter rides, diving tours, and hot air ballooning.

What did Experience Co announce?

For the half-year ending 31 December 2019, Experience Co reported revenue from continuing operations of $60.3 million. This represented a 12.2% decline from $68.6 million reported in the prior corresponding period (pcp) of 1H19.

The company recorded a statutory net loss after tax of $7.1 million, which included non-cash impairment of $8 million. This compares to the $7.4 million profit Experience Co recorded in the first half of FY19.

Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations came in at $9.1 million, down from $15 million in the pcp. Experience Co noted that this result reflects volume decreases across its Skydiving and GBR Experiences divisions.

Results by division

Skydiving volume slumped 9.3% to 84,085 during the period, down from to 92,748 in the pcp. Weather conditions and smoke haze from bushfires impacted the company's operations in the area from Byron Bay to Great Ocean Road, as well as its operations in Queenstown, New Zealand.

Experience Co's GBR Experiences division reported that earnings in 1H20 were impacted by a cyclical downturn in the Tropical North Queensland tourism market. As a result, Cairns airport arrivals down were down by 3.3% compared to the prior period.

On a more positive note, Experience Co reported an improvement in its balance sheet, with pro forma net debt coming in at $7.3 million as at 31 December 2019. This result was linked to the company's divestment of Great Barrier Reef Helicopters as well as the continuation of non-core asset sales.

Outlook and strategy for the remainder of FY20

During the remainder of the second half of FY20, Experience Co will make changes to its business to provide a foundation for improved performance in FY21 and coming years. This will include additional simplification of its business and the further divestment of non-core assets. Experience Co will also be deploying any sales proceeds it receives to further pay down debt.

However, Experience Co anticipates that bushfires and the coronavirus will adversely impact its financial results for 2H20. The company commented that it will continue to monitor ongoing developments in this regard, and remain proactive in mitigating the impact it could potentially have on any of its key markets and operations.

The post Why this beaten-down ASX share is on watch today appeared first on The Motley Fool Australia.

The adventure tourism company's shares were up as much as 13.5% to 25 cents at one stage. They have since pulled back a touch, but are still up 9% at the time of writing.

This puts them ahead of Galilee Energy Ltd (ASX: GLL) and Speedcast International Ltd (ASX: SDA) which are also pushing notably higher.

Why is the Experience Co share price charging higher?

Investors have been buying Experience Co's shares after it released an update on its strategic review.

According to the release, the company has entered into a contract for the sale of the Great Barrier Reef Helicopters business to the Morris Group. Management expects the Great Barrier Reef Helicopters transaction to be completed in early January 2020.

It has also completed the sale of its canyoning business and assets. When completed, both these divestments will deliver net proceeds of approximately $17.5 million, which will be applied to its corporate debt facility.

The company has chosen not to disclose the sale prices of the assets individually, but looks likely to be booking sizeable losses on their disposals.

After all, Experience Co paid $20 million in 2017 for the Great Barrier Reef Helicopters business.

More divestments to come.

The release advises that it has appointed Nash Advisory to run a divestment process for the remaining businesses identified as non-core in its strategic review.

This includes Raging Thunder Adventures and RnR White Water Rafting, Cairns Hot Air Balloon Co, Byron Bay Ballooning Co, and Hunter Valley Ballooning Co.

Experience Co paid $15.45 million for the Raging Thunder Adventures business in 2016. But given how poorly it has been performing, it will be lucky to get anything close to that when it sells it.

However, management believes that shedding these non-core assets is for the best and will improve its return on invested capital.

John O'Sullivan, Chief Executive Officer, said: "We are delighted to today announce an update on the key pillar of the business simplification process being the divestment of non-core businesses. It is particularly pleasing to hand the Cairns headquartered GBRH and Canyoning businesses to the Morris Group and Cairns Canyoning respectively which have established a tourism and hospitality presence in the region."

"The Group continues to execute the outcomes of the strategic review announced on 20 November 2019. The completion of the divestment of GBRH and other non-core assets provides the business with flexibility to pursue growth opportunities better aligned to our core business, expertise and with a focus on return on invested capital," he added.

The post Why this small cap share is the best performer on the All Ordinaries today appeared first on The Motley Fool Australia.

Four shares that have failed to follow the market higher today are listed below. Here's why they are sinking lower:

The Experience Co Ltd (ASX: EXP) share price has crashed 9.5% lower to 23.5 cents. Investors have been selling the adventure tourism company's shares following the release of a disappointing trading update. According to the release, unfavourable weather conditions have impacted its performance in FY 2020. This has led to a decline in tandem skydiving jump volumes and passengers across its reef-based products.

The Flight Centre Travel Group Ltd (ASX: FLT) share price is down over 5% to $40.23 following the release of its FY 2020 guidance. This morning the travel agent giant warned that its first half profit before tax would be down 22% to 36% on the prior corresponding period. The good news is that a much stronger second half is expected. Management expects this to lead to a full year underlying profit before tax of $310 million to $350 million. The mid-point of this range represents a 3.8% decrease year on year.

The Pendal Group Ltd (ASX: PDL) share price has fallen 3.5% to $7.92. This decline appears to have been driven by a broker note out of UBS this morning. According to the note, the broker has downgraded the fund manager's shares to a sell rating from neutral with a $7.45 price target. This was largely on valuation grounds after its shares rallied higher.

The Perenti Global Ltd (ASX: PRN) share price is down 10.5% to $2.09 after a security incident at one of its African operations. Perenti, formerly known as Ausdrill, revealed that there has been an attack on workers at the Bongou mine site in Burkina Faso. The drilling company has confirmed that members of its African Mining Services workforce have been caught up in the incident.

The post Why Experience Co, Flight Centre, Pendal, & Perenti shares are sinking lower today appeared first on The Motley Fool Australia.

In morning trade the adventure tourism company's shares are down a sizeable 15% to 22 cents.

What did Experience Co announce?

This morning Experience Co provided an update on its performance during the first quarter of FY 2020. According to the release, the company's performance has once again been impacted by unfavourable weather conditions.

As a result, its Skydiving business has experienced a 10.4% decline in tandem jump volumes during the first quarter. Which isn't necessarily a bad outcome considering the number of days impacted by weather. This rose 30% on the prior corresponding period.

Also underperforming was its Adventure Experiences business. Revenue for the first quarter was down 21% on the prior corresponding period.

Challenging trading conditions in Far North Queensland, a 10% decline in passengers across its reef-based products, adverse movements in passenger and product mix, and the impact of the discontinuation of a key GBR customer contract have weighed on its performance.

Unfortunately, management expects these trends to continue for the remainder of the half.

In response to this underperformance, the company is busy undertaking a major strategic review of all of its operations. It expects to provide an update on the review at its annual general meeting later this month.

Experience Co is scheduled to hold its meeting on the morning of November 20 in Sydney.

Outlook.

Management warned that if the challenging trading conditions persist, it expects to post a decline in earnings in FY 2020.

As with its strategic review, it intends to provide a further update at its annual general meeting this month. In the meantime, it is focusing on limiting the impact by cutting costs and re-setting the business for improved performance in FY 2021.

The post Experience Co share price crashes lower following trading update appeared first on The Motley Fool Australia.

Resource shares are close to their highs, tech shares are at very high valuations and defensive shares are priced for low interest rates being low for a long time.

If you want to beat the market average, you need to invest in things that a lot of other people aren't investing in.

Cheap shares are often cheap for a reason, businesses that have seen their share prices crushed are usually in trouble. So, just because something has gone down doesn't mean it's better value. But, going contrarian could be a good idea if it makes sense. 

With all that in mind, here are three (very) contrarian ideas:

Japara Healthcare Ltd (ASX: JHC) 

The Japara share price has fallen 62% since the start of 2016 and it's down 30% over the past year. It has definitely been beaten up.

Aged care is no longer a popular sector with limited government funding growth, an aged care royal commission has also put a cloud over the sector. But, there aren't many hearings left. The effects of this could see industry consolidation, bringing more power to the larger players like Japara.

Japara has an impressive pipeline of potential development projects which should raise its revenue and profit over the longer-term.

The ageing population could be an ultra-long-term tailwind that makes Japara worth holding for many years to come.

Experience Co Ltd (ASX: EXP) 

Tough weather conditions and a fall in tourism spending has hurt Experience Co's share price, it's down 70% since mid-December 2017.

An impairment led to Experience reporting a statutory loss in FY19 of $48.3 million. However, a turnaround of consumer sentiment after the federal election could see tourism stabilise during FY20, making today's share price excessively pessimistic. 

Unless climate change is going to mean more frequent extreme weather in Queensland, this could be an opportune time to buy shares with earnings affected by both weather and economic conditions at the same time.

Citadel Group Ltd (ASX: CGL)

The IT business has seen its share price dropped 54% since the middle of February.

If management are correct in their assessment of the situation, that project spending has only been delayed (because of the election) rather than cancelled, then FY20 could be a much better year.

Government organisations will always need technology for their operations. Indeed, you'd hope our governments will keep paying for better and better tech so that they can do their jobs more efficiently, accurately and more securely.

If Citadel expands overseas it could open up an impressive growth runway. 

Foolish takeaway

Out of the three, I think Citadel is the least risky and perhaps the best value trading at 17x FY20's estimated earnings and 12x FY21's estimated earnings. I think Japara is too reliant on government funding (which is very slowly growing) for me to feel at ease and betting on the weather may be too much of a gamble with Experience Co.

The post 3 contrarian ASX shares to buy for brave investors appeared first on The Motley Fool Australia.

Four shares that are climbing more than most today are listed below. Here's why they are ending the week with a bang:

The Appen Ltd (ASX: APX) share price has bounced back from yesterday's selloff and is 4% higher to $25.30. On Thursday the global leader in the development of high quality, human-annotated training data for machine learning and artificial intelligence reported a 60% increase in revenue to $245.1 million and an 81% increase in underlying EBITDA to $46.3 million. This appears to have impressed UBS, leading to the broker upgrading its shares to a buy rating with a $30.00 price target.

The Austal Limited (ASX: ASB) share price has rocketed an impressive 12.5% higher to $4.16. This morning the shipbuilder released its full year results and revealed a massive 64% surge in net profit to $61.4 million. Pleasingly, more growth is expected in FY 2020 with management providing earnings before interest and tax guidance of at least $105 million. This will be a year on year increase of 13%.

The Experience Co Ltd (ASX: EXP) share price has zoomed 23% higher to 24 cents following the release of the adventure tourism company's full year results. Although Experience Co posted a significant loss after tax due to impairments, its EBITDA result was in line with its previous guidance. The company also advised that it will provide an update on a strategic review at its AGM in November.

The Freedom Foods Group Ltd (ASX: FNP) share price has raced 26% higher to $5.07 after delivering strong profit growth in FY 2019. Freedom Foods reported a 34.9% increase in sales to $476.2 million and a 40.9% increase in operating EBDITA to $55.2 million. This was driven largely by strong sales growth from its key Dairy & Nutritional Ingredients and Plant Based Beverages segments.

The post Why Appen, Austal, Experience Co, & Freedom Foods shares stormed higher today appeared first on The Motley Fool Australia.

In morning trade the adventure tourism and leisure company's shares are up a massive 20% to 23.5 cents.

What happened in FY 2019?

For the 12 months ended June 30, Experience Co delivered a 19.2% increase in revenue to $161.3 million. This was driven largely by the full year contribution of acquisitions made in FY 2018 and a 1.3% increase in skydiving volumes to 192,179 jumps.

The company's gross profit grew at a slower rate of 13.6% to $63.2 million. Management blamed its narrowing gross profit margin on the negative impact of its sales mix.

Experience Co posted underlying EBITDA in line with its guidance at $27.2 million, which was down 10% on the prior corresponding period. And due to a $62.5 million non-cash impairment of its Adventure Experiences segment, the company reported a statutory net loss after tax of $48.3 million.

In light of this, the Experience Co board decided not to declare a dividend in FY 2019.

The company's chairman, Bob East, said: "While our core skydiving business returned solid results, FY19 was a challenging year with overall financial performance below expectation primarily in our Far North Queensland operations. The new leadership team, led by CEO, John O'Sullivan, is well placed to review and refine our strategic outlook, simplify the business and drive improved operational and revenue performance aimed at increasing shareholder value."

New CEO, John O'Sullivan, was equally optimistic on the future.

He said: "I am excited to have joined the business and to lead the strategic review. I am confident that the result of the review will deliver improved performance and unlock the earnings and growth capability of this business placing it in a position to meet the demands of our customers in one of the fastest growing sectors in Australia."

No guidance was given for FY 2020, but management intends to present its strategic review update at its annual general meeting in November.

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