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.

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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.

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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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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.

 

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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.

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Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

Blue chip stock Wesfarmers said today at a strategy briefing that third-quarter sales at its Bunnings home improvement stores were up 4.7% on year.

The company also said that comparable store growth for Bunnings climbed 2.6% over the same period.

Wesfarmers’ Officeworks chain sales in the third quarter were up 2.5%.

Management said market conditions remained challenging, with competitive pressure on sales and margins and concerns about consumer sentiment continuing.

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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.

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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%.

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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.

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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.

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