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Live ASX News | ASX Ends 1.21% Lower; Kogan, Step One, Monadelphous, Nanosonics Feature

Many Bored Ape NFTs in danger of getting liquidated

Coindesk reports that NFT lending platform BendDAO has collateralised almost 3% of the entire Boed Ape collection.

As a consequence, many NFTs are facing risk of liquidation.

Coindesk writes:

“The problem is brewing at BendDAO, a peer-to-peer lending service that lets users borrow ether (ETH) against their NFTs. Customers can typically take out a loan equal to 30% to 40% of the NFT collection’s floor price, or the minimum price to purchase one on the open market, with the NFT pledged as collateral.

Floor prices have tumbled in recent months, so much so that 45 of the 272 Bored Apes with BendDAO loans tied to them are now in the platform’s “danger zone,“ when an NFT used as collateral is close to being auctioned off. In other words, $5.3 million worth of Bored Apes are at risk of being liquidated.

A mass liquidation event could also have implications for other NFT lending services, which have risen to prominence in the past year as the NFT industry has exploded in popularity. Also, Bored Apes are one of the most prominent NFT collections, if not the single most important one, so cascading liquidations in that space could have broad consequences beyond just the Bored Apes.”

Read full article here.

 

Bitcoin hovers around US$21,180 at ASX market close

The price of bitcoin is currently hovering at around US$21,180.

The largest cryptocurrency is down about 8% in the last five days.

Bitcoin is currently down roughly 13% since hitting around US$24,500 in mid-August.

 

ASX ends sharply lower in biggest decline in two months

The S&P/ASX 200 finished 1.21% lower on Tuesday, one of its worst days in two months.

The biggest declines of the day:

  • Endeavour finished 12.3% lower
  • EML Payments finished 11.6% lower
  • Telix Pharmaceuticals finished 6.3% lower
  • Zip finished 6.1% lower
  • Credit Corp finished 6.1% lower

The biggest jumps of the day:

  • Altium finished 19.8% higher
  • Ansell finished 8.6% higher
  • Allkem finished 5.3% higher
  • Adbri finished 4.5% higher

 

Kogan and Shopify lose ecommerce bet

Ruslan Kogan – founder and CEO of his namesake — offered a blunt assessment of his company’s FY22.

Ruslan admitted the retailer was wrong in extrapolating ecommerce trends during the COVID-19 pandemic.

He commented (emphasis added):

“The consistency of this growth was rocked by the onset of the COVID-19 pandemic, when customers turned to Kogan.com, and we found that — almost overnight — our business started to double in sales. Kogan. com quickly became the destination that millions of Australians relied on for the most essential items. This acceleration of sales continued for many months in the first year of the pandemic, and we bet that the trend was not going to stop.

“To ensure we could be there for our customers when they needed us most, we increased both our range and volume of inventory, as well as our logistics footprint to match this expected level of growth.

“We were wrong. As the true volatility of the situation settled in — caused by stay at home orders and lockdown ambiguity — eCommerce did not continue to grow as anticipated. This led to us holding excess inventory, and an associated increase in variable costs and marketing costs to sell through the inventory. As we’ve discussed at length through regular updates this past year, profitability in FY22 was impacted.”

Kogan and Shopify lose ecommerce bets

Ruslan Kogan wasn’t the only high-profile CEO of a retail company on the wrong side of the ecommerce bet.

Last month, Shopify CEO Tobias Lutke announced big lay-offs after Shopify’s big push to accommodate a predicted surge in online shopping brought on by the pandemic didn’t materialise.

Announcing the lay-offs, Lutke wrote:

“We bet that the channel mix – the share of dollars that travel through ecommerce rather than physical retail – would permanently leap ahead by 5 or even 10 years. We couldn’t know for sure at the time, but we knew that if there was a chance that this was true, we would have to expand the company to match.

“It’s now clear that bet didn’t pay off. What we see now is the mix reverting to roughly where pre-Covid data would have suggested it should be at this point. Still growing steadily, but it wasn’t a meaningful 5-year leap ahead.”

Source: US Census Bureau

IPO market faces worst year in two decades

The Wall Street Journal reported that the initial public offering market is set for its worst year in decades.

Fledgling companies burning through cash face a challenging time as the money taps dry up.

So far in 2022, traditional IPOs have raised about US$5.1 billion, according to data compiled by Dealogic. The typical amount raised at this point in the year is about US$33 billion.

Last year at this point, IPOs raised more than US$100 billion.

The WSJ reported that the last time IPO levels were as low as they are now was in 2009, when the US was recovering from the great financial crisis.

Read full article here.

Largest every weekly strategic petroleum reserve drawdown recorded last week

Bloomberg energy report Javier Blas has reported a massive 8.1 million barrels release last week from strategic reserves.

If confirmed, it would be the largest ever weekly strategic petroleum reserve drawdown.

Is profit an opinion and cash a fact?

‘Cash is a fact, profit is an opinion.’ Alfred Rappaport

‘Our ultimate financial measure, and the one we most want to drive over the long-term, is free cash flow per share.’ Jeff Bezos

‘It is much easier for investors to utilise historic P/E ratios or for managers to utilise historic business valuation yardsticks than it is for either group to rethink their premises daily.’ Warren Buffett

The reporting season is well underway.

And as company after company lines up to release its accounts, investors are confronted with the perennial question — profit or cash?

More specifically, when analysing a firm’s performance, what’s more important as a metric — a firm’s reported profit or its cash flows?

As companies continue to release their full-year results, attention gravitates towards the bottom line of the income statement.

Has this firm made a profit? Have its earnings grown? Is the profit margin healthy?

Less attention is paid to cash. How much cash is the firm generating from operations? Is it free cash flow positive?

A key argument in favour of prioritising the analysis of cash flows over earnings is the fundamental valuation principle that a business is worth the present value of its expected future free cash flows.

But while market participants may remember the valuation theory that places importance on discounting future cash flows rather than earnings, it is earnings that dominate the discussion.

Earnings per share and price-to-earnings are ubiquitous metrics — widely shared and frequently communicated.

But earnings metrics are flawed, especially if we use them as shorthand for assessing value.

As Stephen Penman wrote in Accounting for Value, when we ‘calculate value to challenge price, beware of using price in the calculation.’

Relatedly, earnings metrics could also mislead us into thinking a business is sound and improving.

Earnings growth is not always a good thing.

As Mauboussin explained in a piece for the Harvard Business Review:

‘EPS growth is good for a company that earns high returns on invested capital, neutral for a company with returns equal to the cost of capital, and bad for companies with returns below the cost of capital. Despite this, many companies slavishly seek to deliver EPS growth, even at the expense of value creation.

‘Theory and empirical research tell us that the causal relationship between EPS growth and value creation is tenuous at best. Similar research reveals that sales growth also has a shaky connection to shareholder value.’

Read full article here.

https://www.moneymorning.com.au/20220823/is-profit-opinion-and-cash-fact.html

US dollar is having its best year since 1997

The greenback is having its strongest year since 1997.

A strong US dollar can spell trouble for emerging markets.

As the Wall Street Journal reported last month:

“Emerging-market countries have varying degrees of their debt in dollars. Dollar-denominated debt issued by governments in Argentina, Ukraine and Colombia all exceeded 20% as a share of their gross domestic product as of the first quarter, according to the IIF, while that figure is below 2% for a handful of Asian and European countries.

“Every country that has large liability in dollars is a cause for concern,” said Marcello Estevão, the World Bank’s global director for macroeconomics, trade and investment.”

ASX All Ords winners and losers at midday: Altium surges, Step One falls

The All Ords is currently down 0.7% on Tuesday.

The biggest winners:

  • Altium up 18%
  • Ansell up 8%
  • Monadelphous up 7%
  • Ainsworth Game Technology up 6%
  • Nueren Pharmaceuticals up 5.5%

The biggest losers:

  • Service Stream down 15%
  • Endeavour down 12%
  • Cettire down 11.5%
  • Australian Clinical Labs down 10%
  • Step One Clothing down 10%

 

Kiryll Prakapenka

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