Simon Herrmann, wise-owl.com
Spring FG (SFL)
Profitable since its first full year of operation, Spring Financial Group is on course to generate its third consecutive year of increased revenue and earnings. The company is now seeking to complement organic expansion with acquisitions. Supported by high dividend payouts and an undemanding valuation, the outlook appears positive. Wise-owl’s valuation stands at 50 cents a share for this newly listed company. The shares were trading at 42.5 cents on March 12.
Crowd Mobile (CM8)
The company owns and operates a portfolio of trade marked software applications and messaging services for mobile devices. Crowd Mobile is poised to monetise a recent distribution investment and increases its service availability from 13 to more than 20 countries. Recognising the company’s capital growth potential, we initiate coverage with a speculative buy recommendation.
PPS is in transition to becoming a self funding company and is debt free. This software technology company recently announced the acquisition of Plum Software, a UK based software firm. This transaction should further strengthen Praemium’s footprint in the UK. The stock has increased significantly in the past few weeks so we retain our hold rating.
Strong retail sales in annuities and growing funds under management reflect CGF’s strong development in building a leading retirement income platform. Despite a 21 per cent decrease in half year net profit to $130 million, CGF has increased its revenue flow by 9.6 per cent to $846 million and experienced modest growth across most divisions. CGF has an attractive income profile, healthy funding position and strong dividend yield.
Walnut and brown onion producer Webster (WBA) announced an off-market takeover bid for cotton producer Tandou at 58 cents a share. Directors are supporting the bid and recommend shareholders accept the offer, reducing the likelihood of a competing bid. The offer has been struck at Tandou’s book value, so, in our view, it’s time to sell and take a profit. The shares were trading at 64 cents on March 12.
Platinum Asset Management (PTM)
PTM offers diversified exposure to US equities, which has been the main driver in the past six months. PTM’s half year results missed some analyst forecasts and increased volatility. With US market conditions expected to be more challenging this year and PTM still trading above its 100-day moving average, we believe it’s an appropriate time to sell. The shares were trading at $8.11 on March 12.
Darren Jackson, Calibre Investments
An ageing population, Obamacare and merger and acquisition deals have made healthcare the strongest performing sector globally. Company specific, Blackmores recently reported a 21.7 per cent increase in half year sales to $206.3 million and, with greater operating efficiency, increased earnings per share by 52 per cent to $1.08. Inroads into China may also offer lucrative future growth prospects for this vitamin and supplements supplier.
Retail Food Group (RFG)
RFG is a proven operator in the retail food space, which we like for its defensive characteristics. Earning per share increased more than 31 per cent to 17 cents in the first half, primarily on the back of debt financed acquisitions which have been earnings accretive. Increasing earnings from offshore enables it to benefit from a falling Australian dollar.
APA Group (APA)
Recent Reserve Bank commentary leaves open the possibility of a further interest rate cut. Europe currently has negative real interest rates and is embarking on quantitative easing. The yield theme still has a way to go provided economic growth remains stagnant. This energy distributor offers a reliable and sustainable income stream and has a trailing dividend yield marginally above 4 per cent.
IMF Bentham (IMF)
IMF is a litigation funder that reported stellar interim results, with earnings per share increasing by 106 per cent to 13.8 cents. A growing portfolio of cases generates more consistent earnings. However, some director departures do detract from what has been an exceptional strong performance.
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Sirtex Medical (SRX)
On November 3, we recommended buying SRX, but since then the share price has risen more than 40 per cent. The clinical trial results of SIRFLOX are due to be released soon. If the results don’t live up to expectations, there’s potential risk for huge downside as the shares are priced to perfection. We’ll sit on the sidelines until the data has been released.
Seven Group Holdings (SVW)
Seven Group is cautious about the outlook in the mining, energy and industrial services sectors. These cover its main operating divisions excluding media. We believe equity dilution or further balance sheet weakness is a possibility if it makes acquisitions in the beaten down energy sector.
Boe Campion, Ord Minnett
Coca-Cola Amatil (CCL)
The company’s earnings have been under pressure in recent years, driven by structural changes in the market place. The 2014 year was one of transition under the guidance of the new CEO Alison Watkins. The beverage maker is making solid progress to stabilise earnings and restore growth.
Tatts Group (TTS)
Several positive catalysts could potentially take the stock higher in the next few years. Tatts is releasing a new national game and expanding distribution channels into petrol stations, while online sales have significant momentum.
Spark Infrastructure Group (SKI)
Underlying EBITDA was about 2.7 per cent above our estimate. The principal driver of the result was higher regulated energy tariffs and lower costs, partly offset by a decline in volumes. Spark’s final distribution of 5.75 cents per share was in line with our estimate, representing a payout ratio of 80 per cent at the corporate level, which equates to less than 50 per cent of operating cash flow.
BHP Billiton (BHP)
The global miner reported stronger than expected first half earnings, driven by lower costs, particularly in the West Australian iron ore division. Net debt was also lower than expected, while capital expenditure guidance has been cut. We have upgraded our medium term earnings estimates to reflect a lower cost base.
Village Roadshow (VRL)
Village Roadshow reported an interim result below our expectations, which led to a recommendation downgrade. We acknowledge problems associated with seasonal factors, but we prefer to remove it while we assess its recovery potential.
The interim result indicates Woolworths continues to lag Coles’ sales growth. The company will have to sacrifice profit margin to become more price competitive. Losses in the home improvement division also continue to mount. This has led to us lowering profit and dividend forecasts.
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