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Any reporting season usually reveals pleasant surprises or disappointing performances from listed companies. According to market analyst James Samson, 1677 companies, or about 90 percent of the ASX, reported either an interim or full year result to June 30, 2013.

We asked five leading market analysts to choose one stock that surprised on the upside and to analyse the company’s prospects for the next 12 months.   

James Samson, Lincoln Indicators

BC Iron (BCI)

Chart: Share price over the year to versus ASX200 (XJO)

Samson says this iron ore producer owns 75 per cent of the Nullagine Joint Venture, while Fortescue Metals Group (FMG) owns the remaining stake. BCI exceeded expectations in its latest full year report. In particular, Samson says, BCI doubled its final dividend to 30 cents, placing the company on an historical full year yield of 7.71 per cent. Earnings per share grew 48 per cent to 62.68 cents. Full year production of 5 million tonnes was a record and underlying net profit after tax was up 41 per cent to $71.4 million. The balance sheet is strong with $139 million in cash.

Samson says the company benefitted from strong iron ore prices and paid down debt. “We continue to believe that BCI trades at an attractive price for dividend focused investors, with market consensus expecting a yield of about 11 per cent on current prices for full year 2014,” he says. “Investing in iron ore carries risk, but for those who may lack diversification in an income focused portfolio, BCI offers an attractive outlook with a strong forecast return.” The shares were trading at $4.53 on October 10.

Peter Moran, Wilson HTM

Money3 Corporation (MNY)

Chart: Share price over the year to versus ASX200 (XJO)

Money3 is a non-bank provider of secured and unsecured personal loans. Moran says it aims to be a leading service provider for millions of Australians with an impaired or incomplete credit history. Moran says Money3 reported a 2013 full year net profit after tax of $3.6 million, a 44 per cent increase on the previous corresponding period. The final dividend was retained at 2.25 cents a share, reducing the payout ratio to 65 per cent.

Since the result, Moran says Money3 has bought the rights to 41 branches of micro lender The Cash Store. Money3 raised $11.9 million in capital to fund further growth. “We see the acquisition as a positive as it provides synergies and cross selling opportunities to an additional 30,000 customers,” Moran says. “On our forecasts, MNY is on a yield of 3.7 per cent and a normalised price/earnings ratio of 16.8 times for 2014.

“Our 12-month share price target has increased to $1.33, up from 98 cents prior to the company’s results.” The shares were trading at $1.03 on October 10.

Joshua Stega, JAS Wealth

Envestra (ENV)

Chart: Share price over the year to versus ASX200 (XJO)

Provides natural gas to retailers via its transmission pipelines and distribution networks. The company reported a net profit after tax of $107.8 million, a 46 per cent increase on 2012. Revenue was up 8 per cent to $507.5 million, which, along with a reduction in finance costs, contributed to the impressive profit result.

“We were pleasantly surprised by the company’s performance and now expect further continuing growth,” Stega says. “The outlook for the natural gas sector is positive as we expect volumes to increase. In our view, Envestra offers the strongest upside in the sector. The dividend is also set to increase from 5.9 cents in 2013 to 6.4 cents in full-year 2014, which is higher than our estimate of 6.2 cents. We like Envestra for its defensive earnings profile, solid dividend yield and future growth prospects.”

John Rawicki, PhillipCapital

Magellan Financial Group (MFG)

Chart: Share price over the year to versus ASX200 (XJO)

Magellan is a specialist funds management business, operating global equity funds. Magellan reported a full year underlying profit after tax of $48.5 million for 2013, an increase of more than 250 per cent. “I expect continuing growth in funds under management, revenues and profits,” Rawicki says. “The company will continue to outperform if recent history is any guide. It knows how to generate rewarding returns from investing in international equities. There’s a lot to like about proven performers.”

Rawicki says the recent share price retreat in response to an investor selling down a major stake creates a good long term buying opportunity. “I forecast a full year dividend of 21.5 cents in 2013 rising to 34 cents in 2014,” he says. “My 12-month share price target is about $12.” The shares were trading at $10.16 on October 10.

Peter Russell, Russell Research

nearmap Limited (NEA)                                                               

Chart: Share price over the year to versus ASX200 (XJO)

Russell says nearmap has developed a top quality aerial photo mapping system. Its internationally patented technology can provide frequent, customised and detailed pictures quickly and economically. A myriad of applications enable monitoring of infrastructure and mining projects, flood damage and land use changes. Most of Australia’s populated areas are now regularly covered. Russell says that in the past year, the company has been rapidly building revenues via subscriptions from corporate and public bodies.

“Last financial year’s $10 million in revenue left a transformed company with $13 million in cash and a $10 million prepaid order book,” Russell says. “We expect it to generate a solid profit in 2014 and beyond as the company expands its market. A good buying opportunity exists at current price levels.”

The shares were trading at 41 cents on October 10.

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