Hot stock picks from the Australian market
Share to buy – Computershare (CPU)
Computershare maintained FY16 guidance and provided greater clarity around cost savings and gearing targets at its recent AGM. We see the company responding to market feedback and this suggests a more communicative stance in the months ahead. With a rise in the Fed funds rate around the corner, which would be a positive for CPU, we see further upside on offer with $12.50 a potential target.
Share to Buy – Qantas (QAN)
Qantas reports tomorrow and is on track to chalk up their largest annual profit since 2008. We are expecting a strong result which could push the share price significantly higher. Earlier in the week, Sydney Airport agreed to buy terminal 3 at Sydney Airport off QAN, for $535 million. In return for Sydney Airport buying back the terminal lease, which had been due to expire in 2019, Qantas has received assurances it will have priority access to 12 of 17 gates and 75 per cent of the check-in area and the majority of the baggage claim area in the terminal between 2019 and 2025. That alleviates QANs concerns that Sydney Airport could turn the terminal, used only by Qantas and QantasLink, into a large multi-user facility post-2019. Technically, the QAN chart is showing us everything we would hope to see and if we get a strong set of numbers tomorrow, the uptrend should continue and even accelerate.
Share to buy – Premier Investments
On March 5th our Head of Research Chris Conway appeared on Sky Business and placed a BUY rating on Premier Investments (PMV), citing the company’s optimisation strategy and growth in its Peter Alexander and Smiggle brands as potential highlights ahead of the company reporting. On March 23rd Premier reported, delivering a 9% increase in half-year profit in defiance of harder times being faced its major department store competitorsPremier lifted its net profit to $56.3 million after stronger sales growth from across its key brands such as Smiggle and Peter Alexander. On the day of reporting, Premier closed up an impressive 11.1% [video width="640" height="360" mp4="http://www.australianstockreport.com.au/21jan_share-tips/wp-content/uploads/Premier-Investments.mp4"][/video]
Fairfax Media (FXJ) Less Cloudy Outlook
Fairfax Media Limited (FXJ) is an Australian multi-platform media group with a broad range of activities including news publishing, information and entertainment, advertising sales in newspaper, magazine and online formats, and radio broadcasting. FXJ conducts its core activities throughout Australia and New Zealand. Its major newspaper brands are The Sydney Morning Herald, The Age and The Australian Financial Review. Additionally, FXJ owns a range of business magazines, websites, and regional and community newspapers. Organisational restructure Last week, FXJ announced some changes to its organisational structure in addition to a major shakeup of its leadership team. Better late than never, the group has recognised the shift from print to digital and is responding seriously to this change. The Australian publishing businesses will be consolidated under the Australian Publishing Media division in an effort to drive efficiencies and simplify FXJ’s business model. Also, the Domain and Digital Ventures businesses will operate as standalone divisions. This will allow the group to devote increased resources and management attention to areas of the business likely to drive its future growth. Advertising weak, but profit rises amid asset sales In February, FXJ announced a 300% increase in 1H13 net profit to $386.3 million. The profit jump came primarily on the back of asset sales, including the company’s 51% stake in NZ-based advertising website, Trade Me, as well as its US agricultural media businesses. The result helped mask a 7% decline in revenue, with FXJ facing a slump in advertising sales across its major divisions amid economic uncertainty. On a positive note expenses fell 3% on-year, whilst the group says it is on track to achieve $251 million in total savings by FY15. The balance sheet was also in much stronger shape, with a net debt to equity ratio of just 5.1% at the end of 1H13. Outlook In its 1H13 results, FXJ argued that a sustained improvement in consumer sentiment is required to see a turnaround in advertising conditions. In the first four months of 2013, the Westpac Consumer Confidence Index has risen to its highest level since December 2010. Since last October, consumer confidence has risen 11.5%. It appears the RBA’s 2012 interest rate cuts are beginning to have a noticeable impact on confidence, leading to improved operating conditions for advertisers and media firms alike. Taking into account its asset sales, organisational restructure and focus on cost control, FXJ is putting itself in a position where it can be more profitable in a slow growth environment. Fairfax was issued as a share to buy to our members on April 8th, if you would like further information you can sign up for FREE share tips and access all our research files on not only FXJ but all our current trading ideas. Simply click here and starting trading today, free for 7 days.
Buy Share Tip: ARB Corporation
ARB Corporation (ARP) is a designer, manufacturer and distributor of accessories for four wheel drives (4WDs). ARP operates throughout Australia from state sales offices with attached warehouses. State sales offices distribute products primarily to ARB branded stores across the country. The company also sells its products to vehicle manufacturers (OEMs) and exports direct from Australia and Thailand, as well as to customers via its US subsidiary, Air Locker Inc. Aftermarket operations accounted for 66% of overall sales in FY12, whilst export sales represented 22% and OEM sales made up 12%. 4WD sales According to the Australian Bureau of Statistics (ABS), sport utility vehicle sales grew 5.9% year-on-year in November. Year-to-date sales in this vehicle category have risen 8.7%. There has also been longer-term shift towards demand for four wheel drives (4WDs) in the Australian vehicle sales market. Passenger car sales increased 6.4% from November 2009 to November 2012. However, sport utility vehicles grew a far more impressive 37.3% over the same period. We expect this trend to continue as vehicle affordability improves due to the current low interest rate environment. Moreover the high Aussie dollar has helped to contain car import costs, with the savings able to be passed onto consumers. As 4WD sales rise, there is expected to be greater demand for 4WD accessories. History of growth ARP capped off a solid FY12 by reporting a 1.7% increase in net profit to $38.5 million. Sales were up a healthy 5.7%, thanks largely to new store and warehouse growth in the Australian aftermarket (ARB stores) segment. The recovery in 4WD production from the Japanese earthquake and Thailand floods in 2011 led to a spike in demand for ARP’s products during the financial year. The balance sheet was in healthy shape with a net cash balance of $33.2 million at the end of June 2012. The results continue a history of robust growth for the group. In the ten years to FY12, revenue has risen at a compound annual rate of 13.2%, with net profit increasing at a rate of 15.8%. Outlook The outlook for ARP is positive despite the still uncertain economic outlook. The group acquired Northern Territory-based Top Gear Accessories in July 2012 and plans to transform this business into an ARB store by 2013. Moreover it acquired a property in Perth in preparation for another ARB store there. In our view, the geographic expansion combined with new store growth will drive even stronger growth in sales Whilst the high Aussie dollar is hurting ARP’s export sales, we feel the growth in the core domestic market will more than offset this, translating into further gains for ARP’s share price. This article was distributed to our members on December 20th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only ABR but all our current trading ideas. Simply click here and starting trading today.
Ainsworth Game Technology (AGI) Stock To Buy
Ainsworth Game Technology (AGI) is involved in the design, production and sale of gaming technology and software. The group’s major market is Australia, but it also has operations in the Americas and Asia, with a focus on expanding its operations North America. AGI derives most of its Australian revenue from NSW and Queensland. However it is North America where the group is currently looking to expand its presence. So far it has obtained licences in 16 US states, 84 Indian Tribes, 4 Canadian Provinces FY12 results AGI’s FY12 results show a company with a solid growth profile. Revenue over the year jumped 54% to 151 million. Pre-tax profit surged 212% to $46.2 million, with eight consecutive periods of growth, as displayed below.The group’s reliance on Australia for earnings has decreased, with 32% of FY12 revenue coming from international sources compared to 24% in FY11. Much of this was driven by the company’s expansion into North America, where revenue was up 109% over FY12. The group’s focus on more profitable operations saw EBITDA margin increase from 26.2% in FY11 to 37.2% in FY12. AGI’s balance sheet is also in a very strong position, with a net cash position of around $51 million and free cash flow of $14.1 million. Outlook AGI’s FY12 results were great. We particularly like the net cash position as it gives the group the balance sheet flexibility to continue its expansion in the US. At the group’s AGM, it forecasted 1H13 profit growth of at least 25% over the $18.8 million made in FY12. However, today the group said that based on the first five months of the financial year it is now expecting an increase of 49%. The group said that strong sales have continued in its core domestic markets of NSW and Queensland. We see more good news on the horizon for AGI and we expect further share price appreciation. This article was distributed to our members on December 13th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only AGI but all our current trading ideas. Simply click here and starting trading today.
Share Tip: Wotif Holdings Limited
Wotif.com Holdings (WTF) is an online travel services business, which represents 23,500 in more than 67 counties. The group’s main website is wotif.com, but it also operates under lastminute.com.au, travel.com.au, Asia Web Direct, LateStays.com, GoDo.com.au and Arnold Travel Technology. WTF, through the aforementioned websites, offers a variety of services that include flights, insurance, car rental, and travel accommodation and packages across hotels, motels, serviced apartments, resorts, guesthouses and bed & breakfasts. The service allows customers to book rooms at a heavy discount and at the same time help hotels better manage their vacancies. FY12 impress, while 1H13 disappoints At first glance WTF’s FY12 results looked good, however when placed in the context of the weak domestic travel market, the results were fantastic. Revenue over the year was up 5%, to $145.3 million. Net profit was $58 million, up 13.8% on the FY11 result. The results were driven by an increase in accommodation rates and sales, and also some significant growth in WTF’s flight booking service. WTF’s operating profit margin also increased from 56% to 59%, with the group demonstrating good cost control whilst expanding revenue. On a more disappointing side, WTF said the first quarter of fiscal year 2013 continues to reflect economic weakness. The 1Q13 performance was in line with the 1Q12 and likely to continue for the remainder of 2012. The group is essentially saying that it expects little revenue or margin growth for the 1H13 as the operations continue to endure a period of prolonged weakness. The good news The AGM was not all bad news with WTF announcing its plans to lift its booking commission rate by 1% from 1 January 2013. This will be followed by a further lift of the same amount on 1 January 2014. The group had $1.16 billion worth of transactions in FY12, and a 1% increase in commissions on this figure would increase of $11.6 million in revenue. If the group’s strong operating profit of 59% stays consistent, the increased commissions would equate to a pre-tax profit increase of $6.8 million. Even with flat transaction growth over the next two years, the two sets of increased commissions suggest the company still has the ability to grow earnings. Outlook WTF’s FY12 results showed a company that is able to grow earnings even in a tough environment. We think that the increase in commissions starting 1 January 2013 will negate the effect of continued weakness within the domestic accommodation market. We would also expect some of the increased revenue to be redirected towards expanding into the less mature flight and holiday letting businesses, which has already started to show promising signs. Given the aforementioned factors we feel WTF has plenty of scope to continue growing its earnings, providing further support for the share price. This article was distributed to our members on December 18th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Wotif but all our current trading ideas. Simply click here and starting trading today.
What’s Hot & Whats Not In The Share Market For 2013
Are you wanting to find out first hand from our panel of professional traders and analysts which stocks are set to sizzle and which could fizzle in 2103? This half-day forum will deliver the best information you'll find anywhere for investing in the share market. In addition to this you'll also enjoy complimentary refreshments and post-event drinks and canapés plus a FREE book - Futures made simple (RRP$29.95), by professional trader and panellist Kel Butcher. Regardless of whether you are an experienced investor or a complete novice this event will be the smartest and most prosperous way to start the New Year. Participants in our last What's Hot, What's Not Forum were provided with a number of investing tips which have proven to be extremely rewarding, see for yourself below.
Recommendation Recommendation Date Entry Price Last Price (19/12/12) Return IRI Long (Buy) 17-Feb 2012 $0.65 $1.35 +107.7% JIN Long (Buy) 7-May 2012 $1.35 $2.50 +85.2% LYC Short (Sell) 17-Feb 2012 $1.22 $0.58 +52.3% IIN Long (Buy) 17-Feb 2012 $3.07 $4.55 +48.2% MTU Long (Buy) 7-May 2012 $3.08 $4.17 +35.4%
Technology One Limited (TNE) On Track For Growth
Technology One (TNE) is an end-to-end software solutions provider, catering for a number of industries including government, education, financial services, health and community, utilities, and managed services such as mining, property and media. Diversified product base TNE is diversified across a number of different products in that it is able to tailor software solutions to meet the needs of its various clients. For example, TechnologyOne Financials offers solutions that can more easily interpret accounting and financial information. Because it generates revenue from multiple streams including business and non-business, TNE is not as sensitive to the economic cycle as some other tech companies. Strong operating metrics TNE has a history of earnings and revenue growth. Revenue has increased at a compound annual rate of 14% per annum since 2003, with net profit growing at 10%. Moreover, the group’s EBITDA margin has hovered around 20% over the past five six-month reporting periods. TNE derives the bulk of its revenue from software licensing and consulting fees. The company receives an initial licensing fee for each of its software, which is supplemented by annual licensing fees and consulting service fees. In 1H12, TNE’s annual licensing fees grew 18% due to high customer retention and satisfaction rates. Although R&D expenses jumped 11% on-year, the Connected Intelligence (Ci) enterprise suite has enjoyed a positive reception thus far. Ci is the group’s flagship suite of products. TNE’s R&D spend is being ploughed into the next generation Ci, and we would expect the product improvement to be a key driver of sales going forward. Future is in the cloud TNE is currently in the process of building its own cloud product, TechnologyOne Cloud. The aim is to offer the Ci enterprise suite through the TechnologyOne cloud. Cloud computing is the process of storing applications and other data on web-based servers, enabling end users to access the centrally-stored information from multiple locations. The cloud’s key benefit for TNE’s clients is that they don’t have to install software on all of their computers and devices, which significantly reduces the cost of doing business. The tech industry is only beginning to scratch the surface with cloud services. Apple released their own version of the cloud with the iPhone 4S, known as the iCloud, late last year. TNE’s version is currently in the trial phase, but we would expect strong demand for this service once it is up and running after the next few years. Outlook TNE has enjoyed solid growth since 2003 due to the quality of its product and service offering. The software industry has low barriers to entry, so there has to be a continual focus on maintaining higher customer satisfaction levels and investing in future technology. The 18% growth in 1H12 annual licensing fees demonstrates TNE’s customer focus, whilst its investment in TechnologyOne cloud is expected to reap long-term benefits. This article was distributed to our members on November 20th, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only Technology One but all our current trading ideas. Simply click here and starting trading today.
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Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 6.45%*
DISCLAIMER: *Performance is derived from recommendations provided by Australian Stock Report’s Trading Report, opened on or after date of acquisition in Nov 2014 *Return figures are gross returns and do not take into account fees or brokerage costs. *Returns are calculated based on a $50,000 hypothetical portfolio, risking 2% of the overall portfolio balance ($1,000) as a starting point for each trade. *Due to slippage and gapping, losses can sometimes exceed $1,000 on an individual trade. *Opening and closing prices for trades (and therefore the prices used for determining aggregate profit/loss) will be those published on the Australian Stock Report website and will be determined by the price at which they could realistically be executed in the market at the time the recommendation is published. *ASX 200 Accumulation Index Return is calculated based upon the price of the index at the start of the session on the day the first ASX 200 trade was placed, i.e. 24.11.2015
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