ASX Small Caps news and tips.
Primary Health Care Primed For Gains
Primary Health Care (PRY) is one of Australia's leading listed healthcare companies, operating as a service company to medical and allied health professionals. PRY also boasts a network of medial and pathology centres across Australia, and is a leading provider of healthcare technology solutions to medical practitioners, medical practices and hospitals. The group’s revenue is divided into four main segments: > Medical Centres > Pathology > Imaging > Health Technology 1H13 Results PRY’s 1H13 results were a solid improvement when compared to the same period in FY12. The group’s revenue came in at $720 million, a 5% increase on the prior corresponding half. EBITDA for the 1H was $186.1 million, an 11.6% increase on 1H12. PRY was impressively able to increase its EBITDA margin by 150 basis points (bps) as a result of revenue gains, economies of scale and operating efficiencies. The group was also able to increase its interim dividend by 30% to 6.5 cents per share. Breaking it down A closer look at the recent results revealed all of the major divisions making positive contributions to 1H13 earnings. The Medical Centres division increased its EBITDA by 9% to 84.0 million, with the business expanding its margin by 80 bps to 55.4%. Pathology EBITDA grew by 13% to $69.5 million, with the margin up 100 bps to 17.0%. The Imaging division EBITDA was up 30% to $35.0 million, with the margin up a staggering 500 bps to 22.6%. Overall it was good to see that all divisions recorded not only EBITDA growth, but also growth in margins, indicating a business with a focus on cost controls. Looking ahead All PRY’s divisions performed well in first half, and we see this continuing in the second half. The group showed it was able grow its business organically, with better economies of scale and operating efficiencies driving expanding margins. With Australia’s ageing population, PRY should be able to grow its earnings at an organic level. The group has also lowered its borrowing costs from $56 million, to $40 million in the 1H13, which should also have flow on effects in the 2H. With think these factors, combined with growth from its Medical Centres division, will result in a solid full year result and further share price appreciation. For more share tips on not only the Primary Health Group, get our latest asx share market trading ideas by signing up for FREE 7 Day Trial and access all our research files.
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.
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.
Kathmandu Holdings Limited (KMD) Report Net Profit Decline
Kathmandu Holdings Limited (KMD) is a provider of clothing and equipment for the travel and adventure market. Retail locations are spread across Australia and New Zealand offering a range of products with technical specifications for different conditions. The company listed on the Australian Stock Exchange in the latter half of 2010. Kathmandu Holdings has reported an FY12 net profit of NZ$34.85 million, a 10.8% fall on the prior corresponding period. Revenue over the period was up 13.4% to $347.1 million. Same store sales growth was 5.7% in the year to July. Despite the sale growth, profit was hurt by lower margins and store refurbishment costs. The group will pay a final dividend of seven NZ cents, fully franked, taking its total dividend for the year to 10 cents.
Resolute Mining Announced Intends To Increase Production FY13 By 14%
[caption id="attachment_22436" align="alignleft" width="67" caption="Resolute Mining Announced Intends To Increase Production FY13 By 14%"][/caption] Resolute Mining Limited explores for, produces and develops gold in Ghana, Mali Queensland and Tanzania. The Company's gold exploration projects include Obotan, Syama, Ravenswood and Golden Pride. Small cap Resolute Mining today announced that intends to increase production in FY13 by 14% to 415,000 ounces of gold. The group also forecasted a rise in cash to $830 per ounce over the same period. Its unaudited FY12 results revealed production of 398,452 ounces at a cash cost of approximately $750 per ounce. To Access FREE Daily Trading Recommendations, Click Here!
Alesco Corporation Takeover Offer from Dulux Group
[caption id="attachment_22051" align="alignleft" width="150" caption="Alesco Corporation Takeover Offer from Dulux Group"][/caption] Alesco Corporation Limited is small cap stock that is involved in the marketing and distribution of industrial products to the building and renovations, construction and mining, scientific and testing and automotive industries. The Company distributes products such as cabinets and panelling, earthmoving and truck tires, garage door openers and laboratory testing equipment. Alesco Corporation has received a $188.4 million takeover offer from Dulux Group. Dulux Group currently holds almost 20% of Alesco shares and has offered $2.00 a share for each remaining share. The offer represents a 42.9% premium from Alesco’s last closing price and will only proceed if the Dulux gain 90% of share on issue. To Access FREE Daily Trading Recommendations, Click Here!
Biota Holding (BTA) To Merge with Nabi Biopharmaceuticals And List
[caption id="attachment_22011" align="alignleft" width="150" caption="Biota Holding (BTA) To Merge with Nabi Biopharmaceuticals And List"][/caption] Biota Holdings Limited focuses on the research and development of new human drugs for the treatment of viral respiratory diseases. Biota's marketed products are used for the treatment of influenza along with an influenza diagnostic test kit. The Company is also developing products for the treatment of RSV and rhinovirus. Small Cap Biota Holding announced that it plans to merge with Nabi Biopharmaceuticals to form a combined company to be listed on Nasdaq. Chairman Jim Fox said “We believe this is a necessary step to increase our options for the development and commercialization of our product portfolio and will ultimately improve the recognition of the underlying value of our product portfolio for our shareholders." Under the merger Biota shareholders will own about 74% of new company, whilst Nabi will own the remaining 26%. Click to Receive FREE Daily Trading Recommendations!
Linc Energy To Buy Golden Concord 5% Of The Company
[caption id="attachment_21946" align="alignleft" width="150" caption="Linc Energy To Buy Golden Concord 5% Of The Company"][/caption] Linc Energy (LNC) is an Australian Small Cap energy company that produces ultra-clean diesel and jet fuels. Linc Energy announced that Hong Kong-based Golden Concord will buy 5% of the company for about $120 million. The investment equates to about $4.50 a share, a significant premium to Linc’s last close of $1.07. The deal forms part of a new venture in which Linc holds a 33% interest and Golden Concord the rest. Click to Receive FREE Daily Trading Recommendations!
Weekly Buy: Aristocrat Leisure (ALL) Reported An FY11 EBIT of $110.8 million
[caption id="attachment_21931" align="alignleft" width="150" caption="Weekly Buy: Aristocrat Leisure (ALL) Reported An FY11 EBIT of $110.8 million"][/caption] Aristocrat Leisure (ALL) develops, manufactures, and distributes gaming machines and systems in Australia, New Zealand, the Americas, Asia Pacific, South Africa and Europe. The group has two divisions Gaming Machines Manufacturing and Gaming Machine Services. ALL is the largest gaming machine company in Australia and the world's second-largest slot machine maker. The company has been a basket case over the past few years amid weak consumer spending and a surging Australian dollar, as well as industry and operational problems. However ALL’s FY11 results showed a return to growth and the company’s earnings finally look to have bottomed out. Super results ALL FY11 were extremely impressive when compared to FY10. ALL reported an FY11 EBIT of $110.8 million, which was up 30.8% on a normalised basis. EPS was up 19.4% to 10.3 cents per share at. More impressive were the results that were reported on constant currency terms. EBIT was $119.7 million, up 41.3%, whilst EPS was up 32% to 13.6 cents per share. Operating cash flow increased from $73.6 million in FY10 to $108.2 million in FY11, a 47% increase. In reflection of a healthier balance sheet, the company was able to decrease its debt by 18.8% to $232 million. Outlook ALL did not provide any specific guidance for the coming year, but did state it expects strong growth in normalised full year net profit after tax in FY12. Since 2008 ALL’s EBIT has contracted significantly on an annual basis, but last year was the first year since then that group has shown growth. The business grew on a normalised basis, but more importantly, on a constant currency basis. As such, any weakness in the Australia dollar will have a positive effect on ALL’s earnings. The RBA appears to have moved to an easing bias, and with the probability of further monetary easing in the US diminishing, a weaker Aussie dollar compared to US dollar is becoming a likely outcome, thus benefiting ALL. The company also looks well placed to take part in any cyclical rebound, which we think is already evident in the latest results. We believe that market sentiment towards the stock has improved drastically in recent times, especially given the spectacular FY11 results. If ALL continues its growth trend we believe there is plenty of near-term upside on the horizon. Click Now for FREE Trading Recommendations
Mirabela Nickel (MBN) FY11 net loss of $50.8 million
[caption id="attachment_21801" align="alignleft" width="217" caption="Mirabela Nickel (MBN) FY11 net loss of $50.8 million"][/caption] Mirabela Nickel (MBN) is a mining company focused on the production and sale of nickel concentrate. The miner’s key asset is the Santa Rita nickel operation in Bahia, Brazil. MBN has faced a number of headwinds in recent times, ranging from lower nickel prices, higher cash costs and a deteriorating cash position. Cash costs soar MBN capped off a disastrous FY11 with a net loss of $50.8 million. This was slightly more than FY10’s $47.6 million. Revenue grew just over 40% due primarily to increased production. However MBN’s cost of sales surged 60% in the same period, resulting in a gross loss of $27.8 million (compared to a $7.8 million gross profit a year earlier). The margin squeeze was most evident in the December quarter. Quarterly cash costs jumped 11% in three months to US$7.42, with the increased output being accompanied by higher plant costs and lower productivity. Additionally, mining costs rose due to increased expenses relating to drilling activity. The ramp up in quarterly production was poorly executed due to the company’s own inefficiencies as well as industry cost pressures. Balance sheet woes Another area of concern was the almost 50% fall in MBN’s cash holdings between the September and December quarters. A significant part of that outflow was due to the closing out of the company’s nickel and copper hedges. The lower cash balance in addition to a new US$50 million debt facility entered into by a Brazilian subsidiary, raises MBN’s risk profile in a period of economic uncertainty. Indeed, S&P picked up on this fact last week when it downgraded MBN’s credit rating due to concerns over a prolonged period of negative operating cash flow. The downgrade presents a double whammy for MBN because it not only validates the existing poor cash position, but raises funding costs for the group, which will heap further pressure on its balance sheet. Outlook When MBN released its December quarter production numbers, 2012 production guidance was raised to 20,000 – 22,000 tonnes of nickel output. As mentioned, greater output is not necessarily a good thing when it is accompanied by higher cash costs. MBN is aiming to lower cash costs towards US$6/lb by the end of the year. However that is largely dependent on the proper implementation of its cost reduction program. Having recently closed out of its nickel hedges, MBN is now fully exposed to the movement in commodity prices. Unfortunately MBN has chosen the wrong time to become an unhedged producer, with London Metals Exchange nickel inventories having risen just over 10%, and prices having fallen around 7%, in 2012. This would be of concern to high cost producers like MBN, as lower selling prices can harm profitability and potentially force them to cut back output. The group’s deteriorating financial position has been picked by the one of the world’s major ratings agencies in S&P. Unless there is a sudden turnaround in the price of nickel (which helps alleviate profitability and cash flow issues), we cannot rule out a capital restructure down the track. We at Australian Stock Report believe these headwinds are likely to weigh on MBN’s share price for a while yet.
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Nov 2014 - Nov 2016
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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