IT Stocks News and Tips on the ASX.
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.
TPG Telecom LTD Buy Share
TPG Telecom Limited (TPM) wholesales bandwidth and other telecommunications services. The company also delivers a full range of telecommunications products and services to home and business consumers through its retail operations. Its network infrastructure includes fixed line, fibre and wireless services connecting voice customers with call collection areas throughout Australia and data and internet customers with more than 350 exchange areas. Key Points FY13 Results impress:
>> Revenue was $725 million a 9% increase on the prior year’s result >> Underlying profit grew by 31% over the year to $149 million, this translating to an impressive 340 basis point expansion in the NPAT margin >> The strong result was on the back of organic growth in its broadband and mobile subscriber base’s >> The group paid total dividends of 7.5 cents a share fully franked, an increase of 36% on FY12 >> Free cash flow grew to $175 million, a 17% increase over the year. The group used $107 million of this excess cash to pay down its debt >> TPM’s net debt is now sits at $16 million, equating to net debt to equity of only 2%
Carsales.com Share to Buy – Zooming Higher
Carsales.com Limited (CRZ) listed as a share to buy in the traders report on September 25th, is an Australian business offering online access to automotive classifieds. It is the largest consumer website in the country that covers automotive, plant machinery, motorcycle, caravan, marine and display advertising. Revenue is principally derived from online advertising, which includes dealer and private sales, and display adverting, where corporate customers such as insurance companies place ads on CRZ’s website. The group also has a data and research services division, which provides solutions to customers including importers, dealers and industry bodies. Strong FY13 Results CRZ capped off a robust FY13 by reporting a 17% lift in net profit to $71.6 million. Impressively this came on the back of a 17% increase in revenue to $184.2 million. Dealer revenue (comprising 45% of group revenue) was up 17%, this despite CRZ upping its advertising rates in February and a reflection of the group’s market dominance. There was a slight lift in EBITDA margin from 55% to 55.8%, which occurred despite a 14% rise marketing costs. Enquiry volumes on new cars were up 23% on-year, whilst overall automotive inventory grew 8% to ~233,000 cars. This tells us that the marketing spend increase is paying off and likely to translate into stronger revenue growth in FY14. Bright Outlook Whilst the overall market is growing, CRZ operates in an industry with low barriers to entry – it’s relatively easy to setup a website offering a similar service. However the group is staying ahead of the pack with the investments it is making offshore and in new products. The group has a 20% stake in iCar Asia, whose auto advertising sites are market leaders in Thailand, Indonesia and Malaysia. In just four months to the end of July 2013, automotive inventory surged 35% on iCar’s sites in these countries CRZ’s focus on product design was on display during the Q32013 launch of tyresales.com.au, a site focused on tyre sales. We think this site has potential because of the way it complements CRZ’s existing automotive sites, its ability to leverage the carsales brand, and the lack of major players in what is a $4.9 billion domestic tyre advertising market. CRZ said that trading for the six weeks post June 30, 2013 had shown solid growth. Along with the RBA’s recent interest rate cuts, consumer confidence is ticking higher and the trend Australian vehicle sales is still pointing up; all likely pointing to a continuation of this momentum. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Buy Share – REA Group Limited (REA)
REA Group (REA) is Australia’s leading online property advertising business. It operates a number of different websites including realestate.com.au and realcommercial.com.au, as well as international property sites such as Italian-based casa.it and Hong Kong-focused squarefoot.com.hk. Realestate.com.au is the group’s flagship website, which generates revenue through subscription fees levied to real estate agents and depth products, which cover priority listings, longer listing duration, and email distributions to members. REA delivered another knockout result for FY13, with net profit rising 26% to $109.7 million. This came on the back of 21% growth in revenue. The group’s flagship websites, realestate.com.au and realcommercial.com.au, helped drive a 22% increase in Australian revenue to $301 million.Product appeal was a significant driver for the business, with listing depth revenue soaring 49% from FY12. Listing depth is now the biggest component of overall revenue, eclipsing listing subscription revenue, which was up a modest 4% on FY12. The popularity of REA’s depth products mitigated the 4% drop in listings from FY12 to FY13, helping the company experience a 27% lift in Australian EBITDA. The group’s offshore operations are also performing strongly, with casa.it enjoying 14% growth in revenue and a 73% surge in EBITDA. Italian subscription revenue was up a healthy 12% despite the nation’s economy experiencing difficult times. REA’s robust profit growth is translating into strong cash flow generation. Operating cash flow climbed 50% from FY12, giving the company plenty of room to upgrade its full year dividend by 26% 41.5 cents. REA Group was listed as a buy share for our members on August 19th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
M2 Telecommunications Group (MTU)
M2 Telecommunications Group Ltd (MTU) is Australia's largest network independent telecommunications provider. The group offer a range of services specifically tailored towards small-to-medium businesses in Australia and New Zealand. MTU encompasses the following brands: >> Commander - offers a wide range of bundled telecommunications services with telecommunications equipment through a national exclusive dealer network. >> iPrimus – offers broadband, phone, mobile and data services to consumers. >> M2 Wholesale - is the exclusively endorsed wholesale aggregator of Optus third generation (3G) mobile services, and wholesale supplier of choice for fixed-line and data services. >> Black + White - is a retail and wholesale provider of the full suite of telecommunications services to small-to-medium sized businesses and reseller telcos in New Zealand 1H13 Results MTU’s 1H13 results were impressive with the company on track to deliver its 8th straight year of earnings growth. The group’s 1H13 results showed spectacular growth when compared to 1H12, with the period benefiting from the acquisition of iPrimus. A few of the key highlights of the results were: >> Revenue was up 65%, to $305.2 million >> EBITDA grew by a staggering 99%, to $55.1 million >> Underlying NPAT rose by 67%, to $31.7 million >> Underlying EPS increased by 32%, to 20.2 cents per share The group was also able to expand its EBITDA margin from 14.9% in 1H12 to 18% in the 1H13. We were particularly impressed by MTU’s ability to expand its margins, as it shows management’s competency and ability to successfully integrate and deliver on synergies benefits. Acquisition based growth MTU first-half growth was driven by the acquisition of iPrimus, with the acquisition still expected to show benefits in the second half. As well as iPrimus the company in March announced the acquisition of Dodo Australia. Dodo is a retail focused of essential services to residential customers that include: >> Broadband >> Mobile >> Home phones >> Wireless broadband >> Power and Gas >> Car, home building and contents insurance The group has a customer base of over 400,000 clients, with 660,000 active services. We think the acquisition is good move as Dodo’s business is a profitable and organically growing business, which is highly complementary to M2’s existing consumer division. Outlook As mentioned, MTU is on track to record its 8th straight year of annual EPS growth and we think the recent acquisitions will see this record continue for many years to come. The group’s has a solid record of successfully integrating new businesses to its current infrastructure. This is evident in the recent results in which iPrimus synergy benefits helped contribute to expanding margins. This gives us high hopes that the Dodo acquisition will be a success, with current estimates expecting the acquisition to result in underlying FY14 EPS accretion of approximately 20%. Overall, we see expect MTU’s FY13 results (due to be released on 28 August) to show solid growth and with think the share price will rise in anticipation of this outcome. M2 Telecommunications was listed as a buy share for our members on August 2nd. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Iinet Limited – Pullback Offers Opportunity
iiNet Ltd. (IIN) is the second largest Internet Service Provider (ISP) in Australia and currently listed in our traders report as a share to buy. IIN has built its own network (the iiNetwork), boasts the largest Voice over IP network in the country, abolished monthly phone line rental with Naked DSL and has released wireless modem-and-phone-in-one BoB to the world. The group’s strategy is to increase value both organically and inorganically, with the acquisitions of TransACT in 2011 and Internode in 2012 two examples of the latter. 1H13 results 1H13 was a breakout period for IIN, which more than doubled its net profit from 1H12 to $31.9 million. This was delivered on the back of a 30% surge in revenue, with IIN experiencing sales growth in its major product categories in addition to a full six month inclusion of TransACT and Internode revenues. Another major highlight of was a 73% on-year increase in EBITDA. This translated to a 35% improvement in EBITDA margin as network cost savings were achieved and synergies were realised from the Internode acquisition. The completion of the TransACT and Internode acquisitions are expected to deliver further cost savings in the next few halves, boosting profitability further. Valuation attractive once more The telco sector has come under heavy selling pressure in recent weeks. Concerns of an upcoming end to global central bank monetary easing have coincided with rising government bond yields. This in turn has diminished the attractiveness of traditionally defensive sectors like utilities, banks and telcos. However, we believe the recent pullback has a fair bit to do with simple profit taking following a year of strong gains. The pullback has also meant many stocks have become more attractively valued. IIN’s one year forward P/E is now just 14.3x. This represents a discount to its closest peers, Telstra (14.95x), TPG Telecom (16.3x) and Amcom Telecom (17.3x). In our view, IIN’s growth potential hasn’t altered in the past few weeks and as such believe it should be trading on a higher multiple. Outlook IIN is on track for another record profit when it reports its FY13 results. Its recent pullback has been overdone in our view, and the forward P/E estimate of 14.3x implies good value around current prices. We expect valuation support to lift the share price higher in coming weeks. Iinet was listed as a share to buy for our members on June 18th. For all of our latest share tips and trading ideas sign up for FREE 7 Day Trial and gain full access our research files.
Seek Limited (SEK) Share Tip
› Seek Employment, which focuses on the online Australian and New Zealand employment › Seek Education, which incorporates Seek Learning and Think Education › Seek International, which includes significant interests in overseas online employment based websites › Revenue growing 32%, to $275.3 million › EBITDA up 20% to $89.8 million › Interim dividend increase of 20% to 10 cents a shareThe above shows the group’s solid history of growing its revenue, much of which has been driven by its domestic business. With online employment volumes under increasing pressure, the group has turned its focus to international expansion for growth. The group's approach to this expansion was to target high growth regions. In the first half of the fiscal year, the group took controlling interest of OCC (Mexico) and Brasil Online (Brazil), both the leading online employment sites in their respective countries. SEK is also in the process of taking a controlling interest in JobsDB (Asia based) and Zhaopin (China), both are leading online employment sites in high growth areas with increasing internet penetration. Outlook SEK’s 1H13 was solid, especially given that its main domestic business experienced an 11% decline in volumes. The key take away from the results was the group’s ability to make up for domestic weakness via its growing international footprint. We particularly like SEK’s approach in this area with the company targeting the high growth regions of Asia and South America. While domestic volumes are likely to be subdued, its international expansion will see the company’s earnings and share price continue to grow. Seek Limited was issued as a share to buy to our members on March 13th, if you would like further information you can sign up for FREE share recommendations and access all our research files on not only SEK but all our current trading ideas. Simply click here and starting trading today, free for 7 days.
STW Communications (SGN) Buy Share Tip
STW Communications (SGN) is Australasia's largest marketing communications group, comprising over 75 specialist companies. Through its subsidiaries, SGN works with Australasia's biggest brands and some of the world's biggest companies, including IBM, Ford, Panadol, Bendigo Bank, PepsiCo, Hyundai, Castrol and Dick Smith, to name just a few.s. The acquisitions In late October 2012, the company announced plans to acquire three companies, paid for via a $40 million capital raising. Markitforce (75% SGN ownership) is a leader in promotional campaign execution and point of sale fulfilment for local and global clients, with clients such as has Unilever, L’Oreal and Boehringer Ingelheim. The acquisition will strengthen SGN’s execution capabilities and offer it exposure to the attractive retail and shopper marketing segment, which only adds to its already well diversified portfolio. Maverick Marketing and Communications(Maverick) (80% SGN ownership) is a leader in experiential marketing from strategic and creative development through to execution. It has clients such as, Telstra BigPond, Coca Cola, Westpac, Bonds, Target and Vodafone to name a few. The acquisition will provide SGN with experiential marketing capabilities, but we think it will provide a great opportunity for SGN’s current companies to leverage Maverick’s client base. Switched on Media (SOM) (75% SGN Ownership) is a digital agency specialising in search engine marketing and social media. SOM’s client base includes Canon, Fairfax digital, Cochlear and Westfield. The acquisition of SOM will not only boost but also compliment SGN’s current digital capabilities. Impact of acquisition The total cost of the acquisitions (including Amblique) is $30.6 million; this includes an estimate of the likely earnout payments to the previous owners. SGN forecast a full year contribution from the acquisitions for CY13 as follows: revenue of $29.8 million and EBITDA of $6.1 million. For CY13 the acquisitions are likely to be EPS neutral on a pre-synergy basis. We expect synergy benefits, especially the cross selling opportunities to some very large blue-chip companies, to provide SGN with some major growth potential. Outlook When SGN reported its 1H12 results, it acknowledged the challenging macro economy and stuck to its FY12 forecast for mid-single digit net profit growth. Longer term, however, it remains in a strong position to benefit from the ongoing shift to digital publishing. This article was distributed to our members on January 23rd, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only SGN but all our current trading ideas. Simply click here and starting trading today.
REA Group (REA) Hot Property – Share Tip
REA Group (REA) is Australia’s leading online property advertising business. It operates a number of different websites including realestate.com.au and realcommercial.com.au, as well as international property sites such as Italian-based casa.it and Hong Kong-focused squarefoot.com.hk. Realestate.com.au is the group’s flagship website, which generates revenue primarily through subscription fees levied to real estate agents. Growth path REA has been on a strong growth path since FY08. In the four years since then, revenue has risen at an average rate of 20% whilst underlying earnings have grown at an average rate of 38%. Impressively, the group has expanded its underlying profit margin each year since FY08 and stood at 31% in FY12. Margin expansion has come as operating cost growth has been kept in check, and revenues have increased due to the group’s property websites strengthening their competitive positions, especially in Australia. Becoming more profitable has allowed the company to accelerate the rate of growth in free cash flow, giving it greater flexibility to boost dividends in coming years. Highlight Realstate.com.au retains a commanding position in the online Aussie property ad market. Its share of the overall market (revenue) was 60% in FY12 and its average monthly unique audience was almost twice that of its nearest competitor. The group took steps in FY12 to protect its market position, launching a new mid-range residential listing product, Highlight. For a $700 monthly fee, Highlight allows vendors to make their ads more prominent among search results on realestate.com.au. In what is arguably a buyer’s market in Australia, we expect property advertising upgrades like Highlight to attract increased interest from vendors looking to sell. In a sluggish domestic property market, product differentiation will play a bigger role in generating revenue for firms like REA. Highlight is an example of this differentiation. Outlook The Aussie property market’s struggles saw the number of REA’s subscription paying agents fall 6.4% in FY12. However the RBA’s spate of interest rate cuts will provide a degree of support to the property market in 2013. This should help stabilise the trend in the number of paying agents. In what remains a challenging operating environment, REA is generating impressive revenue and profit growth. The group said that 1Q13 revenue increased 17%, whilst EBITDA jumped 28%. This bodes well for the remaining nine months of FY13, and reinforces our view that the quality of REA’s product offering (Highlight) and its dominant market position are key factors presently underpinning the share price. This article was distributed to our members on January 22nd, if you would like further information you can sign up for FREE 7day recommendations and access all our research files on not only REA Group 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.
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Nov 2014 - Nov 2016
Our short-term focused Trading Report returned 30.03%, outperforming the ASX/200 Accumulation Index by 23.58%*
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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