One lesson out of last month's reporting season was that cost pressures are persisting for ASX-listed companies. e of a "slightly better than expected" FY 2023 " '

That's the analysis from Wilsons equity strategist Rob Crookston, who argued that the biggest pressure for businesses at the moment is labour costs.

"For instance, Cleanaway Waste Management Ltd (ASX: CWY) reported a heightened number of job vacancies caused employee costs to rise +16% due to the need to pay more overtime and use more expensive labour hire contractors," he said in a Wilsons memo to clients.

While in the longer term, inflation will settle down, according to Crookston, its effects can't be ignored when deciding which ASX shares to buy at the moment.

"The near-term threat to profitability is… meaningful and we see further downside to margins from here, particularly in more cyclical sectors with less pricing power — e.g. retail, discretionary goods."

So which are the best ASX shares to buy under such conditions?

Nothing beats setting your own prices

According to Crookston, "the best defence against cost inflation is pricing power".

"High quality companies with resilient customer demand through the cycle and dominant market positions operating in attractive industry structures are best placed to protect their margins by raising prices."

He named five such S&P/ASX 200 Index (ASX: XJO) stocks that the Wilsons team holds in its focus portfolio:

• CSL Limited (ASX: CSL)
• Resmed CDI (ASX: RMD)
• Telstra Group Ltd (ASX: TLS)
• Insurance Australia Group Ltd (ASX: IAG)
• Lottery Corporation Ltd (ASX: TLC)

CSL can set its own prices as the "dominant and lowest-cost player" in the international blood plasma industry, said Crookston.

"The market for immunoglobulin (IG) products is supply constrained, while underlying demand is highly defensive given IG is used to treat patients with a range of serious immunologic and neurologic diseases."

Another medical player, ResMed, already has about 70% of the sleep apnea device market. According to Crookston, it's on its way to supplying the entire market because its nearest rival, Koninklijke Philips NV (AMS: PHIA), is still hamstrung from a 2021 product recall.

Telstra, whose dominance goes without saying for most Australians, is "committed to raising prices annually (and cutting costs) to offset inflation".

"Mobile net ads were strong in 1H23 in spite of higher prices, and the competitive setting is increasingly rational."

In the recession-resilient insurance industry, IAG can name its own prices.

"Number 1 general insurer in Australia, which has been [raising] premium rates strongly to offset rising perils costs (albeit there is a timing lag to margins)," said Crookston.

"Even with higher premiums, customer retention rates remain high."

He noted that The Lottery Corporation operates in a monopoly in every state except for Western Australia.

"Lottery sales have historically been [highly] resilient in economic downturns, and TLC has a proven ability to incrementally raise ticket prices over time."

The post 5 ASX 200 shares that inflation can't touch: expert appeared first on The Motley Fool Australia.

Earlier this week, The Motley Fool reported Wilsons equities strategist Rob Crookston's seven ASX growth stocks to buy that could become takeover targets.

The idea behind that, according to the Wilsons team, is that acquisition bids are almost always favourable for the existing shareholders.

"Normally, companies are acquired at a significant premium to their latest share price," said Crookston in a memo to clients.

"Identifying companies that will make suitable takeover targets can make for very lucrative investments."

And the great thing for investors is that an actual transaction doesn't even have to materialise for their ASX shares to explode out of the gates.

"Any hint of a possible acquisition can trigger positive momentum even before a bid is announced."

'Infrastructure-like' ASX shares with free cash flow

One way to identify tempting takeover targets is to find companies that are asset-rich that have reliable incomes.

"We screened for infrastructure or 'infrastructure-like' stocks with low market betas, free cash flow yields (FY25) above 4% and companies that haven't seen a material re-rate over the last year."

Using these criteria, Crookston's team came up with six S&P/ASX 200 Index (ASX: XJO) shares that one could buy in anticipation of a takeover bid:

• AGL Energy Limited (ASX: AGL)
• Aurizon Holdings Ltd (ASX: AZJ)
• Ramsay Health Care Ltd (ASX: RHC)
• APA Group (ASX: APA)
• Cleanaway Waste Management Ltd (ASX: CWY)
• Lottery Corporation Ltd (ASX: TLC)

Crookston noted that Cleanaway and Lottery Corp both already feature in Wilsons' "focus portfolio".

"These look attractive acquisition targets due to their stable cash flows, relatively low debt balances and strong market positioning in their respective markets."

The Lottery Corporation also operates as a monopoly in every state except for Western Australia.

"Looks well priced versus other infrastructure-like assets."

Energy provider AGL was already the subject of a failed takeover attempt last year, as was Ramsay Health.

According to Crookston, the story might not be over for Ramsay.

"Cost out and real estate asset sales could be [an] opportunity for the right buyer. Earnings recovery after the pandemic could also be alluring."

Private ownership might actually help freight rail provider Aurizon operate better, read the Wilsons memo.

"Infrastructure asset, monopoly, relatively steady (high) cash flows. Might benefit from being taken private from an ESG perspective."

The post 6 asset-rich ASX 200 shares to buy for their takeover potential: expert appeared first on The Motley Fool Australia.

Four ASX shares that are not letting that hold them back today are listed below. Here's why they are rising:

Atlas Arteria Group (ASX: ALX)

The Atlas Arteria share price is up 1% to $7.11. Investors have been buying this toll road operator's shares after it announced the receipt of the approvals required to acquire a 66.67% majority interest in Skyway Concession Company. It is the concessionaire of the Chicago Skyway.

Cleanaway Waste Management Ltd (ASX: CWY)

The Cleanaway share price is up 1.5% to $2.79. This follows the release of the waste management company's strategy update. Management expects its strategy to create a competitive advantage and leverage digitisation, as well as support margin expansion, organic growth and reduce customer churn.  In addition, the company expects to realise significant efficiency gains through business simplification.

Nick Scali Limited (ASX: NCK)

The Nick Scali share price is up 2% to $11.20. Last week, analysts at Citi responded to the furniture retailer's annual general meeting update by retaining their buy rating and lifting their price target to $15.83. Citi notes that Nick Scali is performing notably better in FY 2023 than it was expecting. Macquarie is also positive and retained its outperform rating with an improved price target of $12.50.

Tyro Payments Ltd (ASX: TYR)

The Tyro share price is up 9% to $1.72. This also appears to have been driven by a positive reaction to an annual general meeting update by a broker. At the end of last week, Morgans retained its add rating with an improved price target of $2.05. It commented: "[W]e believe recent updates are now pointing to improved business momentum and importantly a greater focus on driving profitability. Potential corporate action also remains an area of possible upside."

The post Why Atlas Arteria, Cleanaway, Nick Scali, and Tyro shares are pushing higher appeared first on The Motley Fool Australia.

The Cleanaway Waste Management Ltd (ASX: CWY) share price is under consideration by investors on news the business could expand into the recycling space. It comes after recycling coordinator REDcycle suspended its collection of soft plastics.

It has reportedly ceased activity because third parties can't deal with the huge volume of used soft plastics being returned.

For readers that don't know, Cleanaway is one of Australia's largest businesses operating waste and recycling collection trucks, as well as waste centres. It recently held its annual general meeting (AGM).

Potential REDcycle competitor

The Australian Financial Review (AFR) has reported that Cleanaway and plastics maker Qenos are weighing up a "$500 million co-investment" to step into the space left by REDcycle. The REDcycle program allowed shoppers to return soft (scrunchable) plastics via Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) supermarkets.

Apparently, the two businesses have been "working for months" on a plan to collect around 100,000 tonnes annually of soft plastics through existing household garbage collections. Of course, Cleanaway trucks already do this for hundreds of locations.

Cleanaway boss Mark Schubert explained a final decision will be made by mid-2023 on whether it should proceed, the AFR reports. Though it will depend on the "price and availability" of gas for these potential new plants that may be built on existing Qenos sites in Sydney and Melbourne. This will be an important part of the business case for the ASX 200 share.

According to the plan, the Cleanaway project would aim to recycle about 10 times the quantity REDcycle was collecting.  

How would this work?

If this were to happen, it would be based on a "bag in a bin" concept at each household. Cleanaway would integrate the soft plastics pickup into the weekly truck collection schedule. Mr Schubert said:

It's a very convenient solution at scale, you do a bag in a bin.

What the REDcycle program showed is there is huge community and customer support. What's required though is scale.

Our plan would be to invest in the front-end sorting.

It would take about two years for the plants to be fully operational. Cleanaway would share about half of the $500 million cost.

Cleanaway has reportedly already done trials of soft plastic pick-ups for about 2,000 homes in inner Melbourne.

The AFR reports that the technology to do this already exists. In fact, it's happening overseas on a commercial scale. In terms of the process, the newspaper said:

The companies would jointly invest in the advanced recycling technology to convert the soft plastics into feedstock, and make new plastic through a process known as pyrolysis. The end product is a polyethylene called Alkanew, which can be used to re-manufacture the very same packaging.

Is the Cleanaway share price an opportunity?

In 2022 to date, Cleanaway shares have fallen by more than 12%.

Macquarie currently has an outperform rating on the ASX 200 share, with a price target of $2.90. This implies a mid-single-digit rise for the Cleanaway share price. Though, potential cost pressures are giving the broker cause for caution.

The post Could this ASX 200 share cash in on the suspension of REDcycle? appeared first on The Motley Fool Australia.

There are a number of factors I like to look at when thinking about ASX dividend shares.

A large number of ASX shares do pay dividends. However, that's not the only thing I look for.

Names like Commonwealth Bank of Australia (ASX: CBA) and Woodside Energy Group Ltd (ASX: WDS) are known for their dividend payments. I don't think size is an essential part of the picture.

For my own portfolio, these are the sorts of things I'm thinking about:

Growth potential

For me, a good dividend is at the end of the financial conveyor belt. I want to look at good companies, with seemingly good management, in attractive industries. The most important thing to remember is that a dividend is paid from the earnings that a business makes.

If a company's profit were to steadily go down year after year but keep paying the same dividend, then the dividend will become unsustainable at some point, such as when the dividend payout ratio goes above 100%.

However, if earnings are growing, then obviously the profit can't be falling. A growing profit suggests the business is doing well, and may imply the dividend can grow. A combination of rising dividends and climbing profit may lead to pleasing total shareholder returns.

A good ASX dividend share may not necessarily grow profit every single year. But, I'm looking for businesses that can grow their profit at a pleasing rate over the long term.

Companies such as Cleanaway Waste Management Ltd (ASX: CWY), Sonic Healthcare Limited (ASX: SHL), and Metcash Limited (ASX: MTS) are examples of names that are growing their dividend and underlying profit over time.

Dividend yield

A business isn't necessarily an ASX dividend share just because it pays a dividend. It needs to have a certain level of dividend yield to count. With interest rates normalising, or already normalised, I think companies probably need to have a yield of at least 2.5%, or perhaps even around 3%, to truly count.

As an example, Altium Limited (ASX: ALU) has one of the most impressive dividend records going on the ASX. It has increased its annual dividend every year over the past decade. The actual payment has multiplied in size over the years. But, it currently has a dividend yield of around 1.25%.

Names like Accent Group Ltd (ASX: AX1), APA Group (ASX: APA), Baby Bunting Group Ltd (ASX: BBN), JB Hi-Fi Limited (ASX: JBH), and Telstra Group Ltd (ASX: TLS) are examples of companies with higher dividend yields.

Resilience

I'm typically looking for companies that have a good chance of continuing to pay good dividend income even during tougher times. I don't want the dividend stream to disappear at the time I'm relying on it most.

Dividends aren't term deposits, they can be cut. In 2020, we saw dividend cuts from many names including CBA and Transurban Group (ASX: TCL).

But, there were plenty of businesses that did grow their payout during the COVID-19 years, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), Brickworks Limited (ASX: BKW), Rural Funds Group (ASX: RFF), Pacific Current Group Ltd (ASX: PAC), and Duxton Water Ltd (ASX: D2O).

Businesses that have resilient earnings profiles could be able to continue to pay dividends, even during tough times.

The post 3 key things I look for when buying ASX dividend shares appeared first on The Motley Fool Australia.

Will the market be able to build on this on Friday and end the week on a high? Here are five things to watch:

ASX 200 expected to fall

The Australian share market looks set to end the week in the red after Wall Street tumbled overnight. According to the latest SPI futures, the ASX 200 is expected to open 55 points or 0.8% lower this morning. In late trade in the United States, the Dow Jones is down 0.9%, the S&P 500 has dropped 0.7%, and the Nasdaq has fallen 0.35%.

Oil prices rise again

Energy producers such as Beach Energy Ltd (ASX: BPT) and Woodside Energy Group Ltd (ASX: WDS) could have a decent finish to the week after oil prices pushed higher again overnight. According to Bloomberg, the WTI crude oil price is up 1% to US$88.61 a barrel and the Brent crude oil price is up 1.3% to US$94.57 a barrel. OPEC's production cuts have boosted prices to three-week highs.

Dividends being paid

Today is payday for a number of dividend-paying ASX 200 shares. This includes insurance broker AUB Group Ltd (ASX: AUB), waste management company Cleanaway Waste Management Ltd (ASX: CWY), property company Home Consortium Ltd (ASX: HMC), telco Spark New Zealand Ltd (ASX: SPK), and logistic solutions technology company WiseTech Global Ltd (ASX: WTC).

Gold price edges higher

Gold miners including Newcrest Mining Ltd (ASX: NCM) and St Barbara Ltd (ASX: SBM) will be on watch after the gold price edged higher overnight. According to CNBC, the spot gold price is up 0.05% to US$1,721.70 an ounce. The precious metal appears to be running out of steam after some strong gains recently.

TechnologyOne rated neutral

The team at Goldman Sachs has retained its neutral rating on TechnologyOne Ltd (ASX: TNE) shares with a $13.15 price target. This follows the company's Showcase event this week, which highlighted its cloud-native future and new fee model. Goldman commented: "The company did not elaborate on the pricing of its SaaS+ model, except to say that it will be greater than the current typical annual SaaS fee and will index with CPI."

The post 5 things to watch on the ASX 200 on Friday appeared first on The Motley Fool Australia.

But instead of letting that ruin our weekends, let's instead take a look at the ASX shares that are currently at the peak of the ASX 200's share trading volume charts, according to investing.com.

The 3 most traded ASX 200 shares by volume this Friday

Cleanaway Waste Management Ltd (ASX: CWY)

A relatively rare appearance from waste disposal company Cleanway marks our first highly-traded ASX 200 share today. So far this Friday, a hefty 11.2 million Cleanaway shares have been recycled on the markets. We've seen no news out of the company so far during this session.

So perhaps this huge volume can be put down to the movements of the Cleanaway share price itself. Cleanaway shares have taken a hit today, but are still outperforming the broader markets with their loss of 1.64% at $2.70 a share.

Telstra Corporation Ltd (ASX: TLS)

Next up this Friday is ASX 200 telco Telstra. A sizeable 15.27 million Telstra shares have been called in so far during today's session. Telstra hasn't been immune to the woes of the share market today either.

The telco has presently lost a sobering 1.95% at $3.76 per share. Perhaps the woes revealed today in the broader telco space are also influencing Telstra's share trading volumes as well.

Pilbara Minerals Ltd (ASX: PLS)

Our third, final and most traded ASX 200 share today is none other than lithium producer Pilbara Minerals. This Friday has seen a notable 26.23 million Pilbara shares bought and sold on the share market thus far. This appears to be the result of some potent volatility in the Pilbara share price itself.

The company initially opened well in the green this morning, rising as high as $5.03 a share. But the losses of the markets appear to have quickly sapped investors' confidence. Pilbara shares are now down a nasty 3.04% at just $4.79 a share.

The post Here are the 3 most heavily traded ASX 200 shares on Friday appeared first on The Motley Fool Australia.

At a time of rising inflation, there is one key metric that investors should research before buying a new ASX share, says Prasad Patkar, head of qualitative investments at Platypus Asset Management.

In an article published by the Australian Financial Review (AFR) today, Patkar says it's pricing power.

Patkar said:

If you are only allowed to look for one metric to assess the quality of a business, it would be sustainable pricing power. It is an attribute of particular import today when rising input costs are eroding margins for those who don't possess pricing power.

Analysts grill ASX companies on their pricing power

JP Morgan strategist Jason Steed said price increases were a hot topic during reporting season.

There was a marked increase in the number of questions on price increases in conference call transcripts. Analysts wanted to understand the capacity each company had to raise prices to offset rising costs. Steed said: "Through the season, focus on the topic of price increases hit an all-time high."

A company's ability to raise its prices is important for ongoing profitability.

Rising inflation means many companies are paying more for the inputs into their products and services. So, they need to be able to raise customer prices to help offset or overcome those cost increases.

The ability to raise prices also means companies can take advantage of inflation to an extent, with both business-to-business customers and consumers aware and somewhat accepting that 'everything is going up'.

Which ASX shares have pricing power?

Patkar said businesses with pricing power include REA Group Limited (ASX: REA), Pro Medicus Limited (ASX: PME), ARB Corporation Limited (ASX: ARB), and IDP Education Ltd (ASX: IEL).

Patkar elaborated:

It is not a discretionary purchase for the customer. The product or service offered is superior to that of competition and is backed by reputation or brand. The cost to switch between competitors is usually high and not worth the hassle or risk.

Companies like REA, Seek Limited (ASX: SEK), and Carsales.com Ltd (ASX: CAR) have consistently increased their prices almost every year over the past decade.

REA put its prices up nationally by an average of 8%, according to the article.

The CEO of Ansell Limited (ASX: ANN), Neil Salmon, said they had upped prices without much fuss:

We've seen good receptivity to those price increases and that's why I remain confident that we should be able to fully pass through the inflation effects we see in the rest of our business.

The challenge is getting the balance right. Some companies will lose demand if they raise their prices too much. So it depends on how popular their products and services are and how necessary each customer deems them to be.

Wilsons Advisory told its clients that Cleanaway Waste Management Ltd (ASX: CWY), Telstra Corporation Ltd (ASX: TLS), Lottery Corporation Ltd (ASX: TLC), CSL Limited (ASX: CSL), Resmed Inc (ASX: RMD), and James Hardie Industries plc (ASX: JHX) have significant pricing power to help them offset rising costs.

Some companies protect themselves from rising inflation through contract arrangements with built-in CPI-linked price increases. According to the AFR, 68% of the revenue of Transurban Group (ASX: TCL) is protected this way.

Sustainable and temporary pricing power

In assessing a company's pricing power, Patkar says investors need to differentiate between sustainable and temporary pricing power.

Patkar said: "When demand went through the roof post COVID and supply couldn't keep up, everyone seemed to have pricing power. In a shortage, you can take price almost at will."

Businesses with sustainable pricing power "can take price steadily and regularly because the value they
add to customers is so much larger than the price they charge for it".

Right now, some companies are taking advantage of unprecedented demand in their sectors to raise prices. However, this demand might be temporary.

In Australia, the cost of building a residential house has risen substantially due to supply chain issues, extra demand from tens of thousands of HomeBuilder projects, inflation, and a lack of skilled labourers.

According to the quarterly CoreLogic Cordell Construction Cost Index, the cost of building a house has risen by 10% over the 12 months to June 2022 — the highest increase since the GST was introduced in 2000.

Such demand pressure has allowed building materials manufacturer Boral Limited (ASX: BLD) to bring forward its annual price increase to August. This is on top of extra price rises earlier in 2022 for products like cement and concrete.

Boral CEO Zlatko Todorcevski said:

These are some of the largest pricing increases by geography and by product line that we've put in the market over the past five years. And I think that's appropriate. I think it's reflective of the inflationary environment we're facing.

Big price rises or little price rises?

Some companies with pricing power raise prices in large chunks, while others prefer a steadier approach.

According to the AFR, examples of companies undertaking double-digit price increases include Brambles Limited (ASX: BXB). The cost of hiring CHEP pallets in the United States in 2H FY22 rose by 17%.

ARB says it prefers to do small but frequent price increases given rising inflation is expected to continue into 2023.

ARB says monthly demand for its products has been four times pre-COVID levels. This puts them in a good position to raise prices.

The post Looking to buy ASX shares? Expert reveals 'one metric to assess the quality of a business' appeared first on The Motley Fool Australia.

The ex-dividend date is an important day for companies in the S&P/ASX 200 Index (ASX: XJO). 

When an ASX 200 share goes ex-dividend, buyers won't be eligible to receive the company's upcoming dividend payment. 

Plus, companies often see their shares drop when they turn ex-dividend as the value of the dividend payment leaves the share price.

With the ASX share market closed on Thursday as the nation commemorates Queen Elizabeth II, ASX 200 shares have been shuffling around their ex-dividend dates.

Here are three ASX 200 shares that will be calling time tomorrow on their upcoming dividend payments.

Cochlear Limited (ASX: COH)

First up, ASX 200 healthcare share Cochlear will be turning ex-dividend tomorrow.

This means that today is the last day to snap up the company's partially-franked final dividend of $1.45.

If you're on Cochlear's share registry by the closing bell today, you can pencil in a payment date of 17 October.

Cochlear continued its recovery from COVID in FY22. Cochlear implant unit volumes grew by 5%, contributing to $935 million in cochlear implant sales revenue, up 3% from the prior year.

Meanwhile, underlying net profit after tax (NPAT) jumped 18% to $277 million.

The company returned 71% of these profits to shareholders through annual dividends of $3 per share, up 18% from FY21.

This puts Cochlear shares on a trailing dividend yield of 1.4%.

Cleanaway Waste Management Ltd (ASX: CWY)

The next cab off the rank is Cleanaway, which will be trading tomorrow without an unfranked final dividend of 2.45 cents per share.

The ASX 200 waste management company has a dividend reinvestment plan (DRP) available for shareholders. Those who don't elect to participate should see this dividend payment come through on 7 October.

Cleanaway delivered double-digit sales growth in FY22 as revenue leapt 18% to $2.6 billion. This growth was driven by the acquisition of the Sydney Resource Network, new municipal contracts, and strong commodity prices.

However, operational challenges led to a 5% fall in underlying NPAT, which came in at $145 million.

Across the financial year, the company hiked its dividends by 7% to 4.9 cents per share. This means that Cleanaway shares are currently throwing out a trailing dividend yield of 1.8%.

In other news, last month, Cleanaway launched a $400 million capital raising to fund its 'BluePrint 2030' strategy. As part of this strategy, the company has acquired licensed composting business Global Renewables for $168.5 million.

Adbri Ltd (ASX: ABC)

Last but not least, Adbri will also be closing the curtain tomorrow on its upcoming dividend payment.

The ASX 200 construction materials company recently handed in its first-half 2022 results, trimming its interim dividend by 9% to 5 cents.

Shareholders should see this fully franked dividend land in their accounts on 5 October. 

Adbri shares have drudged up a 24% fall in the last month after the company's HY22 results disappointed investors. 

The company grew its topline by 8% to $812 million on the back of strong construction and mining sector demand and improved pricing across most of its products.

However, Adbri's profits didn't hold up so well. Underlying NPAT dropped 1% to $54 million, weighed down by a series of operational challenges.

This included extreme wet weather events on the east coast of Australia, higher input costs, and anticipated lower lime volumes. 

Looking ahead, the company is expecting to grow its underlying earnings in the second half, driven by increased contributions from cement, concrete, aggregates, masonry, joint ventures, and recent acquisitions.

Adbri shares are currently trading on a trailing 12-month dividend yield of 5.9%, which grosses up to 8.4% with the benefit of franking credits.

The post Here are 3 ASX 200 shares turning ex-dividend tomorrow appeared first on The Motley Fool Australia.

The Cleanaway Waste Management Ltd (ASX: CWY) share price is in focus after the company announced its latest acquisition.

Cleanaway has a market capitalisation of $5.6 billion at the time of writing. However, it's about to get a bit bigger after the company announced a capital raising and a deal to expand its network.

Let's look at what the company announced.

Global Renewable Holdings

Cleanaway has big plans with its 'Blueprint 2030' strategy, which includes medium-term opportunities to "deliver the blueprints under the strategic infrastructure growth and sustainable customer solutions pillars". This starts with Global Renewables Holdings Pty Ltd (GRL).

GRL is a licensed composting facility that processes around a fifth of Sydney's 'red bin' household waste at its strategically located Eastern Creek site and delivers around 30% of landfill diversion and "better carbon outcomes" compared to landfill.

The facility currently composts 'organics' from red bin household waste and will gradually transition to source separated food organics and garden organics feedstock to meet council customer needs.

Cleanaway is the exclusive contracted provider of waste to the GRL facility until 2032, with waste supply underpinned by contracts with surrounding councils, with which Cleanaway has long-term existing relationships.

Cleanaway said it's committed to enhancing the facility over time, including an expected $40 million to $45 million update to enclose the compost maturation area.

What are the financial implications for Cleanaway shares?

Cleanaway has entered into a binding agreement and the overall acquisition price is $168.5 million.

The company said that GRL would add 5.2% to its earnings per share (EPS) on an FY22 basis based on the placement proceeds used to fund the purchase price and transaction costs associated with the acquisition.

Cleanaway said this provides the business with an opportunity to immediately internalise existing volumes and acquire "attractive" pro forma FY22 earnings before interest, tax, depreciation and amortisation (EBITDA) of approximately $21.4 million.

The acquisition also eliminates an unfavourable contract provision for Cleanaway in relation to GRL where payments to GRL exceeded receipts from councils (this contract was acquired as part of the Suez acquisition).

Cleanaway also said this deal would allow it to leverage its geographically diverse network to capture organics share, with GRL and a further planned Lucas Heights facility providing Sydney-wide processing capability.

How is it going to pay for this?

Cleanaway is undertaking a fully underwritten placement of new Cleanaway shares to eligible institutional investors to raise $350 million.

The offer price is $2.50, which is a 7.7% discount to the last closing price of $2.71 per share.

This will result in around 140 million new shares being issued, representing 6.8% of its existing issue capital.

With the share purchase plan, eligible Cleanaway shareholders will be able to subscribe for up to $30,000 of new shares. It's intended to raise up to $50 million.

Cleanaway share price snapshot

Cleanaway shares are currently halted at $2.71 each. They have dropped 14.5% this year to date, but are up almost 6% over the past 12 months.

The post Looking to buy Cleanaway shares? Here's what you need to know about the company's latest acquisition appeared first on The Motley Fool Australia.

The Cleanaway Waste Management Ltd (ASX: CWY) share price won't be trading this morning as it undertakes a $400 million capital raise. It has also announced an acquisition.

If that wasn't enough to keep investors busy, the waste management group also released its full-year results at the same time.

But you won't be able to use the Cleanaway share price as a barometer for its earnings news. The shares are unlikely to start trading until Monday.

Cleanaway share price undergoes a capital raise

This is to give the company time to pass the cap around. It's looking to do a $350 million fully underwritten institutional placement. It will also undertake a $50 million non-underwritten share purchase plan for existing shareholders.

The offer price for the placement is set to $2.50 a pop. This represents a 7.7% discount to the last closing price for Cleanaway shares yesterday.

The price under the SPP will be the same as the placement or at the five-day VWAP – whichever is lower.

How Cleanaway will use the proceeds from the capital raise

Proceeds from the raise will be used to fund Cleanaway's growth strategy and to pay for the takeover of Global Renewables Holdings Pty Ltd (GRL). Cleanaway is buying the business for $168.5 million.

The acquisition price represents 7.9 times the enterprise value of the target's actual FY22 (FY22A) pro forma EBITDA.

Cleanaway believes it's paying an attractive price, particularly as it regards itself as the natural owner of GRL.

What the acquisition means to Cleanaway

GRL is a licensed composting facility that processes ~20% of Sydney's 'Red bin' household waste at its strategically located Eastern Creek site. It delivers ~30% landfill diversion and better carbon outcomes compared to landfill.

The bidder estimates that the deal will be 3.7% EPS accretive on a pro forma FY22A basis. It also believes there is incremental earnings upside as additional capital is deployed into growth projects targeting a double-digit return.

Stronger sales but lower profits

Meanwhile, management handed in its earnings report card that showed an 18.4% increase in net revenue to $2.6 billion.

But its underlying earnings fell due to costs linked to its acquisition and integration of the Sydney Resource Network (SRN).

Summary of Cleanaway's FY22 results  

• Net revenue increased 18.4% to $2,603.8 million
• Underlying Earnings before Interest and Tax fell 0.6% to $257.1 million
• Cash flow from operating activities increased 9.9% to $466.3 million
• Total dividend per share increased 6.5% to 4.9 cents
• Statutory net profit fell 45.4% to $80.6 million

The big drop in the statutory profit is not only related to SRN but also the New Chum landfill rectification post floods, leadership transition and equipment loss in the Health Services business.

Management commentary

The managing director of Cleanaway, Mark Schuber, commented:

In a year of significant challenges posed by a global pandemic, natural disasters, supply chain disruptions and emerging inflation, Cleanaway delivered a strong financial performance.

While Cleanaway is not immune to inflationary pressures, we do have mechanisms within many of our contracts that allow us to recoup rising costs over time, but there is a time lag on our ability to recover these amounts, which has resulted in a temporary impact on margins.

Outlook

Cleanaway is expecting to deliver stronger earnings in FY23 compared to the last financial year. This is due largely to the full-year contribution of SRN, underlying growth and returns from its growth initiatives.

It expects underlying EBITDA to range between $630 million and $670 million for this year. So far, it believes it is on track to deliver a result at the mid-point of this range.

The guidance excludes the ~$21 million in annualised EBITDA contribution from the GRL acquisition. Management isn't willing to bank that in just yet as material factors, like volumes into post collections assets and labour availability, can affect the outcome.

The post Cleanaway share price halted amid results, $400m cap raise and acquisition appeared first on The Motley Fool Australia.

It might be counterintuitive, but sometimes investors might be best served to ignore an earnings downgrade.

That's because if the business is still in a position to take off in the long run, a one-off downgrade may not matter that much.

In fact, it might even present a juicy buying opportunity as skittish shareholders sell off their holdings and bring the price down.

Fortunately for us, Red Leaf Securities chief executive John Athanasiou reckons he's found an ASX share that's just in that situation.

'A dominant position in an industry with high barriers to entry'

The share price for Cleanaway Waste Management Ltd (ASX: CWY) has dropped almost 17% since 21 April.

The movement down wasn't helped by an update to the market in May.

"The company downgraded earnings due to floods and higher fuel and labour costs," Athanasiou told The Bull.

But this is a temporary hiccup, and the analyst feels like the structural advantages for Cleanaway are still in play.

"The waste management company has a dominant position in an industry with high barriers to entry," said Athanasiou.

"The bulk of the company's revenues are generated from recurring multi-year contracts."

Athanasiou would buy the stock now for holding over an extended period.

"Despite a lag in cost recoveries, Cleanaway's longer term outlook is bright."

Cleanaway is scheduled to report its preliminary numbers on 19 August.

Recurring revenues with pricing power to fight inflation

Back in June, Wilsons head of investment strategy David Cassidy also spruiked Cleanaway's long-term potential, calling it a "quality" ASX share with inflation protection.

"The majority of Cleanaway's revenue is contracted and therefore recurring," he said at the time.

"Multi-year contracts provide steady volumes and recurring revenues and include appropriate price adjustment mechanisms."

The wider analyst community is somewhat divided over the waste management provider.

According to CMC Markets, seven out of 14 analysts currently recommend Cleanaway shares as a buy, with five rating it as a hold.

The post 'Outlook is bright': Expert names ASX share to buy for long-term fortunes appeared first on The Motley Fool Australia.

During turbulent times like now, it is imperative to properly balance risk and return when investing in ASX shares.

That's according to Wilsons head of investment strategy David Cassidy, who said share markets are under threat.

"The risk of recession has increased over the past month," he said in a Wilsons memo.

"We think that risks are likely to stay elevated as the market becomes more concerned about the growth outlook as the US Fed and RBA hike rates at a lightning pace over the next 3 months."

To combat this uncertainty, Wilsons analysts have adjusted their "focus list" of desirable ASX shares.

But don't get too conservative, is the advice from Cassidy.

"We implore investors not to get too bearish as we believe global inflation — led by the US — and recession risks should fade over the next 6 months."

He then named three ASX shares that his team has added, with one specifically a standout:

'Quality can outperform over the long run'

Wilsons analysts believe there are some quality companies selling for excellent value after the recent market sell-off.

"We believe quality can outperform over the long run and should generate even better relative returns if bought at a reasonable price," said Cassidy.

"We screened the S&P/ASX 300 (INDEXASX: XKO) and found a dozen names of quality stocks that look 'value'."

Subsequently, his team has added its weighting to CSL Limited (ASX: CSL) and Telstra Corporation Ltd (ASX: TLS).

CSL shares have lost 8.6% since the start of the year, and still have not returned to their pre-COVID high.

Similarly the Telstra share price has dipped 8.9% year-to-date, although it is 7.4% higher over the past 12 months.

But the overwhelming winner in the hunt for "quality defensives", as Cassidy calls them, is Cleanaway Waste Management Ltd (ASX: CWY).

Recurring revenue from long-term and inflation-protected contracts

Cassidy described the waste management provider as displaying "quality earnings growth with defensive characteristics".

"The majority of Cleanaway's revenue is contracted and therefore recurring," he said.

"Multi-year contracts provide steady volumes and recurring revenues and include appropriate price adjustment mechanisms."

To demonstrate, Cassidy cited how the company's local government contracts typically run for seven to 10 years. Commercial and industrial clients often sign up for 3 or more years.

Adding to this is that Cleanaway's business is "largely insulated" from inflation via contract terms that allow pricing to move up if expenses do.

"The key costs for CWY are labour, waste disposal and fleet costs (fuel, repair and maintenance, etc)," said Cassidy.

"Rise and fall clauses in contracts capture relevant labour fuel and general CPI changes."

Cleanaway also has a dominant position in an industry that has very high barriers to entry.

The share price has fallen almost 20% year-to-date, and Wilsons reckons the sell-off is overdone.

"Cleanaway trades on a 12-month forward PE of 27x. We think this is a reasonable multiple for a quality defensive in a market-leading position, with long-term contracts insulated from inflationary pressures," said Cassidy. 

"This multiple also looks reasonable relative to the 25% growth expected over the next few years for Cleanaway."

The post 'Don't get too bearish': 3 ASX shares Wilsons just added appeared first on The Motley Fool Australia.

The Cleanaway Waste Management Ltd (ASX: CWY) share price has started lower on Wednesday, currently 3% down at $2.60.

The company today released an update in relation to its New Chum inert landfill in Ipswich, Queensland.

In wider market moves, the S&P/ASX 200 Index (ASX: XJO) has lifted 43 basis points from the open to 6,551.5.

What did Cleanaway announce?

The company provided an update on the New Chum site following damage caused by the flood
events this year.

As a quick recap, the company said:

In February 2022, a significant rain event resulted in inundation of a new cell that was under construction at New Chum. Shortly thereafter the site was closed and related remediation activities commenced, including tankering water offsite for treatment and disposal. Towards the end of May 2022 more rain events added to the body of water, further impacting remediation.

As a result, Cleanaway says the site is likely to remain closed throughout FY23 due to the extensive work required.

The company also provided a clear update on its expected costs for the remediation. It may recover some costs through insurance – but this won't appear in FY22 financial statements.

In FY22, $30-$40 million of costs are expected to be incurred relating to rectification and remediation at New Chum. These include $11 million of costs expected to be incurred through to 30 June 2022 with the balance relating to a rectification provision to cover further works to be undertaken in FY23.

A further $6 million of net costs will be incurred in FY22 relating to property damage and rectification
and remediation at other sites because of the floods.

The company also mentioned it was awaiting the outcome of a Queensland Planning and Environment Court (2021) decision regarding the "application for a height rise extension".

Cleanaway share price snapshot

In the last 12 months, the Cleanaway share price has fallen 4.76%, and nearly 17% this year to date.

The post Cleanaway share price slides amid revised costs from flood damages appeared first on The Motley Fool Australia.

Shares inside the S&P/ASX 200 Index (ASX: XJO) that offer an above-market average dividend yield tend to be popular among investors.

A high dividend yield is an enticing characteristic for any company, but a high yield can come and go in a flash. Ideally, we are looking for businesses that can reliably grow dividends in a sustainable trajectory. These are companies that have consistently increased their dividends per share year after year, after year, after year — you get the idea.

Sounds dreamy, doesn't it! Well, here are three ASX 200 shares that have been living up to the 'dividend beast' moniker by steadily increasing their dividends over the past five years.

ASX 200 dividend shares that keep on giving

Before we get into the thick of it, the criteria for an ASX 200 company to feature in this list is simple… but not easy. Crucially, annual dividends per share (DPS) paid to shareholders need to have increased each year for the past five years. If the DPS were flat or fell for a single year, it is scratched from consideration.

Steadfast Group Ltd (ASX: SDF)

Australiasia's largest general insurance broker network, Steadfast has lived up to its name over the last five years when it comes to dividend payments. Despite swinging into unprofitability for a short time during 2020, the company has navigated the financial waters to deliver a steadily growing annual dividend, as illustrated below.

Similarly, this ASX 200 share has provided investors with considerable capital appreciation over the years. Today, the Steadfast share price is 80.4% higher than where it was five years ago. For comparison, the benchmark index is only up ~24%.

Steadfast currently offers a dividend yield of 2.51%. This might seem low, but when accounting for the rate of growth in dividends, this company earns its spot as a bona fide dividend beast.

Cleanaway Waste Management Ltd (ASX: CWY)

This ASX 200 share is one of the dirtier companies on our list, but its dividend track record is anything but rubbish. Playing an integral role in waste management solutions, including recycling facilities, treatment plants, and refineries, Cleanaway has built an admirable business over the years.

While the rate of growth in dividends per share has slowed in the past couple of years, Cleanaway has still managed to consistently increase its payout to shareholders. Notably, earnings in the first half were suppressed by acquisition costs. However, the integration of Sydney Resource Network demonstrates the company's continued reinvestment for sustaining further potential dividend growth.

Once again, this is a company with a relatively low yield at 1.7%. However, a five-year dividend compound annual growth rate of 20% is impeccable.

Pro Medicus Limited (ASX: PME)

Lastly, this ASX 200 share comes with the smallest dividend yield. However, what it lacks in size it makes up for in growth. At a compound annual growth rate (CAGR) of 43% over five years, Pro Medicus is growing its dividends at a blistering pace (see chart below).

A company growing at a high clip rate while also offering a dividend is typically a peculiar sight. The reason behind this medical imaging company's unique combination of income and growth is its stellar profit margins. For the 12 months ending December 2021, Pro Medicus derived $37.98 million in earnings on a 47% margin.

For some, a yield of 0.4% may not cut it to be considered a 'dividend beast'. But, at the rate those dividends are growing, this is arguably a future dividend beast in the making.

The post Dividend beasts: 3 ASX 200 shares that have powered up their dividends over the past 5 years appeared first on The Motley Fool Australia.

The Cleanaway Waste Management Ltd (ASX: CWY) share price has been in the red all day following news of a disruption to the company's operations in Victoria.

The waste management's shares are trading 2.60% lower at $2.82 at the time of writing.

The drop coincides with bearish sentiment on the S&P/ASX 200 Industrials Index (ASX: XNJ) and the S&P/ASX 200 Index (ASX: XJO), which are down 1.23% and 0.85%, respectively.

Let's take a look at the news out of Cleanaway on Thursday.

Cleanaway suffers another setback

Investors are offloading Cleanaway shares following the company's announcement that its operations have been disrupted.

In today's release, Cleanaway advised that a fire broke out yesterday at its medical waste processing facility in Dandenong, Victoria.

While no Cleanaway staff or contractors were hurt, the fire "caused significant damage to the equipment at the site". As a result, the company said the Health Services business unit would be disrupted for an unspecified period of time.

Management is looking at ways to treat and dispose of medical waste that would usually be handled at the site. This includes temporary licence approvals to process medical waste at other Cleanaway facilities as well as disposal with third parties.

Cleanaway estimates the disruption will impact earnings before interest, tax, depreciation, and amortisation (EBITDA) by roughly $2 million to $3 million each month. While this is a preliminary forecast, the company expects to provide a clearer picture of the financial toll when available.

Unfortunately, this will further dampen Cleanaway's balance sheet after the company provided a disappointing trading update in early May.

Previously, Cleanaway stated that EBITDA would already be $15 million to $20 million lower than its prior guidance. This is due to higher fuel and labour costs, and the recent east coast floods which caused property damage along with loss of vehicles and equipment.

About the Cleanaway share price

Since the start of the year, the Cleanaway share price has moved in circles to register a loss of 10%.

The company's shares touched a 52-week high of $3.31 in April before reversing its year-to-date gains.

Cleanaway commands a market capitalisation of around $5.8 billion, with approximately 2 billion shares outstanding.

The post Why is the Cleanaway share price heading south today? 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:

Appen Ltd (ASX: APX)

The Appen share price is down 6% to $5.57. Investors have been selling Appen's shares this week following a broker downgrade by Citi and weakness in the tech sector. The former saw Citi downgrade the artificial intelligence data services company's shares to a neutral rating with a $6.60 price target.

Cleanaway Waste Management Ltd (ASX: CWY)

The Cleanaway share price is down 3% to $2.80. This morning this waste management company revealed that a fire at its medical waste processing facility in Dandenong has caused significant damage. This is expected to disrupt operations at the site "for a period of time." Management estimates that it will impact EBITDA by $2 million to $3 million per month while out of action.

Syrah Resources Ltd (ASX: SYR)

The Syrah share price is down 10% to $1.38. Investors have been selling this graphite producer's shares amid worrying events near Ancuabe in the Cabo Delgado Province of Mozambique. This is 200 kilometres away from Syrah's massive Balama Graphite Project. According to the release, the company has received reports of an insurgent attack at a mine project site near Ancuabe. Syrah has suspended transport activities but its mining and processing operations continue for now.

Westpac Banking Corp (ASX: WBC)

The Westpac share price is down over 3% to $21.26. This morning analysts at UBS downgraded this banking giant's shares to a neutral rating and cut the price target on them to $26.00. UBS highlights that banks have traditionally underperformed the market during periods of high inflation and low growth.

The post Why Appen, Cleanaway, Syrah, and Westpac shares are dropping appeared first on The Motley Fool Australia.

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

AGL Energy Limited (ASX: AGL)

The AGL share price is down 3% to $8.37. Investors have responded negatively to news that Mike Cannon-Brookes has snapped up an 11.28% blocking stake in the energy company. Mr Cannon-Brookes wants to prevent AGL's demerger. Though, management revealed that it remains committed to progressing the proposed demerger and believes it is in the best interests of AGL shareholders.

Booktopia Group Ltd (ASX: BKG)

The Booktopia share price has crashed 25% to 47 cents. Investors have been selling this online book retailer's shares after it released a disappointing trading update and announced the shock resignation of its co-founder and CEO. In respect to the former, revenue for the quarter fell 1% over the prior corresponding period to $64.5 million and EBITDA fell 65% to $1.5 million.

Cleanaway Waste Management Ltd (ASX: CWY)

The Cleanaway share price is down 4% to $3.02. Investors have been selling this waste management company's shares after it revealed that its EBITDA would be $15 million to $20 million lower than expected in FY 2022. This is due to higher fuel and labour costs and one-off operational disruptions.

Corporate Travel Management Ltd (ASX: CTD)

The Corporate Travel Management share price is down 3% to $24.97. This follows the release of a trading update from the corporate travel specialist. Corporate Travel Management revealed that the Omicron variant impacted its recovery during the third quarter. And while management expects a big fourth quarter and for momentum to carry over into FY 2023, it hasn't been enough to keep some investors from selling shares.

The post Why AGL, Booktopia, Cleanaway, and Corporate Travel Management shares are dropping appeared first on The Motley Fool Australia.

Here's what is happening on the ASX 200 today:

Woolworths sales update

The Woolworths Group Ltd (ASX: WOW) share price is pushing higher after investors responded positively to the retail giant's sales update. For the 12 weeks ended 3 April, Woolworths reported sales growth of 9.7% over the prior corresponding period to $15,123 million. This compares favourably to Goldman Sachs' estimate for total sales growth of 6.4% to $14.7 billion.

AGL shares lower

The AGL Energy Limited (ASX: AGL) share price is falling on Tuesday. This follows news that Mike Cannon-Brookes has snapped up an 11.28% stake in the energy company. Mr Cannon-Brookes made the move in an attempt to block AGL's demerger. However, management remains committed to progressing the proposed demerger and believes it is in the best interests of AGL shareholders.

Corporate Travel Management update

The Corporate Travel Management Ltd (ASX: CTD) share price is under pressure today following the release of an update out of the corporate travel specialist. That update revealed that the Omicron variant impacted its recovery during the third quarter. Nevertheless, management expects a big fourth quarter and for momentum to carry over into FY 2023.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Magellan Financial Group Ltd (ASX: MFG) share price with a 7.5% gain on no news. Going the other way, the Cleanaway Waste Management Ltd (ASX: CWY) share price is the worst performer with a 4.5% decline. This morning the waste management company revealed that its EBITDA would be $15 million to $20 million lower than expected in FY 2022 due to higher fuel and labour costs and one-off operational disruptions.

The post ASX 200 midday update: Woolworths' Q3 update, AGL falls on Cannon-Brookes raid appeared first on The Motley Fool Australia.

Tuesday has shaped up to be a good day on the market, particularly for these S&P/ASX 200 Index (ASX: XJO) shares. They've surged to their highest point of the last 12 months.

Right now, the ASX 200 is 0.62% higher. That's helped it reach its own high point – the highest it's been since early January.

So, which ASX 200 shares are joining in on today's momentum to set new 12-month records? Let's take a look.

3 ASX 200 shares hitting 52-week highs on Tuesday

Endeavour Group Ltd (ASX: EDV)

The Endeavor share price surged to a new 52-week high of $7.85 in intraday trade today – a 1.15% gain – despite only silence from the company.

In fact, the Woolworths Group Ltd (ASX: WOW) spin-off and house of Dan Murphy's hasn't released news to the market since early February.

But that doesn't mean Endeavour hasn't been busy. It opened its first premium Dan Murphy's Cellar last week.

It also opened its first bar – ZERO% – selling alcohol-free drinks in Melbourne last month.

Incitec Pivot Ltd (ASX: IPL)

The Incitec Pivot share price also reached a new 52-week high of $4.17 on Tuesday, representing a 4.25% gain. That's the highest the ASX 200 share has traded since 2018.

While there's been no price sensitive news from Incitec Pivot, the company did provide a positive update on its Waggaman Ammonia Plant this morning.

Back in February, the plant was shut down after a hydrogen release was detected at the facility. Investigations later found the incident was caused by a rupture in a section of pipe, resulting in an extended shutdown for repairs.

Today, Incitec Pivot announced production at the plant has restarted and is operating at name plate capacity.

The company expects the shutdown to have an impact on its earnings before interest and tax (EBIT) of around $173 million and an impact on its net profit after tax (NPAT) of approximately $124 million.

Around 75% of that will be recognised in its earnings for the first half, set to be released next month.

While the company's working to progress a claim under its comprehensive property insurance policy, it won't include any adjustments for potential insurance recoveries in its upcoming results.

Cleanaway Waste Management Ltd (ASX: CWY)

The final ASX 200 share hitting a new 52-week high on Tuesday is Cleanaway.

The waste management company's stock surged 4.9% in intraday trade to reach a high of $3.21.

There's been no news from the company to explain its gains. However, its share price has been outperforming over the long term.

It has gained 29% over the last 12 months, outperforming the ASX 200 by 22%.

The post 3 ASX 200 shares smashing 52-week highs on Tuesday appeared first on The Motley Fool Australia.