ASX 200 recovers, Altium (ASX:ALU) shares disappoint

The ASX 200 (ASX: XJO) is now up 0.2% after initially being down at the start of trade.

Worries about a second wave in Victoria and the increased restrictions have put a little uncertainty into investors’ minds.

Altium (ASX: ALU) disappoints

The Altium share price is down 7.7% after the software business lowered the market’s revenue expectations in an update.

Altium said that while its attractive pricing and extended payment terms to support its customers during COVID-19 are driving strong (subscription) seat growth, its increase in revenue for the full year, while likely to be solid, “will be below latest analyst consensus”.

Altium usually does a lot of its business in the last two weeks of June. However, this June, Altium’s progress has fallen behind current analyst consensus. The company is going to be impacted by the recent lockdown in Beijing and increased COVID-19 infection rates in the US.

The company is still ‘aggressively’ closing sales with some larger deals still in the pipeline. Seat growth is up 7% on the same period last year. But Altium’s decision to temporarily lower prices for Altium Designer is impacting revenue for the full year.

Transurban (ASX: TCL) traffic returns

Transurban said that traffic is improving with the recovery directly tied to government responses. There are different trends developing across different markets, so future performance will depend on government actions and the overall economic conditions.

The toll road operator said that, in the 14 June 2020 week compared to the prior corresponding period, Sydney traffic was down 9%, Melbourne traffic was down 31%, Brisbane traffic was down 14% and North American traffic was down 43%. Across the group, traffic was down 21%.

Transurban continues to work with its contractors and governments to deliver its portfolio of large projects, which is helping people stay employed and supports the supply chain.

The toll road business has announced an FY20 second half distribution of 16 cents per share, taking the full year distribution to 47 cents per share. That brings the yield to 3.2%.

Challenger (ASX: CGF) is doing a capital raising

The annuity business has announced that it is going to launch a capital raising to strengthen its capital position and provide flexibility to enhance earnings.

Challenger intends to “prudently and progressively” deploy the money into ‘investment grade’ fixed income opportunities which are expected to be return on equity (ROE) accretive for shareholders. In other words, the opportunities may produce stronger ROE returns than Challenger currently is.

Managing Director and CEO Richard Howes said: “Following the pandemic market sell-off, fixed income asset risk premiums have widened significantly and we are now seeing opportunities, primarily in investment grade, to selectively invest this cash and liquids balance and generate pre-tax ROEs in excess of 20% on the capital backing these investments. This is well above our pre-tax ROE target of the RBA cash rate plus a margin of 14%. Importantly, we can capture these opportunities, while maintaining our current defensive portfolio settings, with a high weighting to investment grade fixed income.” 

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