Online job market place provider Freelancer Ltd (FLN) debuted on the ASX in November 2014 with great fanfare. The issue price was a mere $0.50 per share and the stock opened trading on the ASX at $2.50. It closed the day at $1.60 after posting an all-time high of $2.60. The share price fell to an all-time low of $0.52 in little more than one year.
At its current price of $1.45 Freelancer is up 102% year over year. It is now considered one of the hottest stocks on the ASX, having recently posted record revenue for the Half Year 2015. Freelancer is not the only former market darling stock to rise from the ashes. Online insurance comparison site ISelect Ltd (ISU) fell from its 24 June 2013 closing price of $1.56 to an all-time low of $1.05 along the way to its current $1.80 per share.
The ASX has seen many IPO’s since 2013 and there are a few that have fallen by the wayside that could match the rebound performances of Freelancer and ISelect. We found six, all operating in businesses likely to benefit from long term trends like healthcare, mobile connectivity, agriculture, and education. The table below looks at the first day trading prices along with an all-time high stock price and a percentage difference between the high and the current price. Here is the table.
1st Day Trading
1st Day Trading
(Closing 13 August)
(25 Nov 2014)
19 Feb 2015)
(11 Oct 2013)
19 March 2014)
(11 June 2013)
(9 Dec 2013)
10 June 2014)
(14 Mar 2015)
14 Mar 2015)
(02 Sep 2013)
20 Sep Feb 2013)
Medibank Private (MPL) was one of the most hyped IPO’s of recent memory. Bullish commentators pointed to the potential cost savings due to more efficient management under a private entity versus a government run business. Medibank is the largest health insurer in the country with 30% market share.
The share price hit its all-time high within six months, but it has been all downhill since. Here is a price movement chart for MPL since it debuted on the ASX.
Now commentators argue that investors expected too much too fast from the supposed increased efficiencies and cost savings to be generated by a profit-conscious private management. In its first financial reporting since the IPO, management reported cost-cutting efforts were “on track” and in fact met forecasts from the IPO Prospectus. But that wasn’t enough for investors and the share price has been in decline since that release on 20 February.
In addition, competitive pressures that did not get much coverage pre-IPO are now cited as a contributing factor in the share price decline. It seems Aussies are increasingly opting for cheaper policies and reducing coverage on existing policies. In fact, Medibank actually owns one of its competitors – subsidiary Ahm Health Insurance, a company that describes itself as “cheap.” The ISelect website is growing as consumers reportedly are seeking more cost-effective health insurance.
Despite these concerns Medibank stock has an analyst consensus rating of Hold with four analysts at Buy and two at Outperform, along with five Holds, four Underperforms, and one Sell. Given the growing need for healthcare and the government’s commitment to support private health insurers MPL deserves a place on your watch list, at least till the first full year financial reporting.
OzForex Group (OFX) is an international provider of foreign exchange payment transfers for both businesses and consumers. The company had a successful track record as a privately held business and was touted as one of the hottest IPO’s of 2013.
Initially the share price shined but began moving downward in a volatile series of ups and downs, reaching an all-time low of $2.00 on 9 July 2015. Here is the price movement chart.
It is likely the extreme volatility of OFX is a case of heightened expectations. Early financial reporting included rising costs and fewer than expected new clients. Shareholders expecting the moon began to return to earth. Full Year 2015 Financial Results reported on 26 May were solid with an 18% increase in clients along with a 24% increase in revenue and a 54% profit increase. However, investors focused solely on the 26% increase in operating expenses and the stock price took another hit.
Investors may be waking up since the share price hit its all-time low as the price has been moving upward since. The company is poised to grow its US market and has no debt with $168 million cash on hand. OzForex recently announced an “Accelerated strategy” with a goal of doubling 2015 revenue in four years to over $200 million. Management also provided earnings guidance calling for a 14% increase in earnings for FY 2016. Five analysts cover the stock with two at Buy and three at Outperform.
Virtus Healthcare (VRT) is in the fertility business, with a broad range of services from diagnostics to day hospitals. The company primarily operates in Australia but has a presence in Ireland and Singapore as well. The share price roared out of the gate reaching its all-time high in just five months. Here is a price movement chart for VRT.
The bottom fell out on 2 June 2015 when the company issued downward guidance for the Full Year 2015, ending on 30 June. This followed a 1.6% decline in profit reported in the Half Year Results back in February.
Virtus specializes in In-Vitro fertilisation with a technology that is not patented. The company’s growth stems from adding doctors to its network of providers, the pace of which has slowed following its first year of operation following the IPO. In addition, there is increased competition in the space from two other Australian companies, Primary Health Care (PRY) and Monash IVF Group (MVF). Market demand is favorable as more and more Australians are having children later in life when the need for specialised fertility services increases.
On the positive side, the company’s current fully franked dividend yield is 5.1% with a two year growth forecast of 6.5%. The two year earnings growth forecast is 10.5%. The stock has an analyst consensus rating of Outperform, with two at Buy, two at Outperform, two at Hold, and one at Sell. The trailing twelve month P/E ratio is which compares very favorably with the Healthcare Sector P/E of 23.69.
Vocation Limited (VRT) is in the vocational training business, offering courses to individuals and businesses throughout Australia. This is another IPO that got off to a great start, but VRT’s fall from grace was quick and dramatic. Here is the price chart.
Vocation’s troubles began when the Victoria Department of Education and Early Childhood Development (DEECD) was reported to be conducting a review of Vocation courses, withholding payments for three courses. Vocation management reassured investors there was no problem with the review.
The share price cratered on 28 October when management announced it would be foregoing government funding in the amount of $19.6 million, blowing a $5 million dollar hole in the company’s earnings for FY 2015. This company may be in an attractive space, but the fact management appears to have misled investors with statements concerning the absence of any material effect resulting from government reviews makes this stock a candidate for only those with the highest risk tolerance. Some might go so far as to say the stock is not even suitable for mad dogs and punters.
Following the initial drop the CEO resigned and the class action suits began. The new chairman is promising a turnaround.
OtherLevels Holdings (OLV) is the most recent IPO listed in our table, debuting on 14 March of this year. The company serves customers in three business segments – Mobile Gaming; Mobile Wagering; and Membership and Loyalty Programs. OLV has a cloud-based software solution that provides a digital messaging platform for its customers to communicate with their customers. This is instant communication and it provides OLV users with great flexibility in evaluating different marketing strategies.
The demand for better and faster mobile communication is exploding and OLV may be a stock to benefit handsomely from this exploding trend. This is a tiny company with little coverage, making it difficult to research. In addition, the company has only been in business since 2012.
However, checking the company’s ASX announcements since it began trading provides some promising prospects.
First, OLV has entered into two strategic business partnerships, one with digital media and advertising agency Switch Digital; and the other with BlueCats Australia, a company using the latest high tech craze in the mobile world – Beacon Technology. Beacons are small battery operated devices that can be attached to a wall or countertop to send messages and prompts to a mobile device via a network. Tech gurus tell us Beacon Technology has the potential to revolutionize retail shopping. BlueCat has offices in Austin Texas as well as here in Australia.
Second, a major European sports betting site, Mathcbook.com, has chosen the OLV digital marketing platform. Of greatest interest is the announcement that US betting site, BetAmerica, has selected OLV’s platform to use with the site’s new iPhone App. BetAmerica is one of the few legal online betting sites in the US. The company accepts bets on horse and dog races and fantasy sports games.
OLV is operating in a highly competitive space, so there is significant risk in this stock. Given the growth of mobile device use worldwide, the reward potential is substantial.
The final stock in the table is Potash exploration and mining company Fertoz Ltd (FTZ). The company has exploration assets in Canada, Australia, and the US; with the most promising being Wapiti East, one of five projects in British Columbia.
Potash is an essential ingredient in fertilizer for agricultural use. Global demand for food is not declining, although the price of potash has. However, unlike most other commodities, the price of potash has actually rebounded a bit, rising US$20 per metric tonne year over year.
The Fertoz projects are close to needed infrastructure and in December of 2014 the company announced a Marketing and Distribution Agreement with Alberta, Canada based EnviroPerfect Solutions to sell rock phosphate from the Company’s Wapiti and Fernie projects in British Columbia. This is one to watch.
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