Equities Commentary

Growth Focus: Bionomics Ltd (BNO)

by Patrick Taylor



Date of Data Capture: 16/11/2016

Name: BIONOMICS LTD (BNO)

Classification: Biotechnology

Current Price: $0.38

Market Capitalisation: $188M

Forecast EBITDA Growth: 227%

Gross Yield: 0%

Consensus Price Target: $1.63

# Covering Analysts: 3

Discount at Current Price: 329%

Price Target Trend: Increasing Flat

Signal Time Frame: Quarterly-Daily

Trend Bias: Up-Flat Long-Short

Indicators:
Short-term: Positive
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: BUY
Focus: Capital Growth

Set up Notes:
• BNO are just starting to move out of a long-term downtrend in place since early 2014, backed up by very strong fundamentals.
• Technically the stock looks very good also with strong multi-timeframe momentum building behind positive news flow.
• We have some overhead resistance above, clustered around 40-45c - but the excellent long-term correlation (and aggressive price targets) raises our sights to resistance targets of 55c, 65c and 85c above this.
• Any pullback from here will find structural support around 35c, 30c and 25c, show-casing a favourable risk/reward ratio.


Growth Focus: Bionomics Ltd (BNO)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

We all go through down periods and patches where we feel like our value is underappreciated, but rather than avoid these situations we seek them out - they are precisely the kind of investment opportunities we look for. Bionomics Ltd (BNO) is just such a case where we believe the dark clouds are giving way to bluer skies and it is just a matter of time until they realise their full potential.

The company began operating in 1998 and are headquartered in Thebarton, SA and their business focus is developing novel therapies to treat cancer and nervous system disorders like anxiety and depression. Despite the huge markets and potential of this biopharmaceutical company their performance over the last few years has seen shareholders downcast and their share price cast down after their licensing deal with Ironwood Pharmaceuticals flopped in 2014.

Things have been on the rise since then as they self-progressed development in this same therapeutic through trials and have recently shown excellent results (outperforming a major market player with no significant side-effects and lower dosage) and seem to be on the cusp of emerging from their lows. They have been banging the drum in the US recently and we wait to see what my arise from these stirrings.

This adds to their already impressive results regarding their vascular disrupting cancer therapy seen as having good potential to extend checkpoint inhibition and indicates huge scope and potential. Merck is the first big international partner on board but with strong results we would be surprised if there weren’t more deals in the pipeline as they look to partner out for this next stage of growth.

Their price targets are also starting to jump ahead, now sitting at $1.63 and currently showing a discount of over 300% to aggregate estimates (the highest target recently rose to $2.60) and have good growth forecasts to back them up. A new trial has begun for application into treating PTSD (Post Traumatic Stress Disorder) which could add yet another string to their already heavy bow.

The price history reflects events closely but doesn’t really show much more than the normal evolution of a promising biotech company progressing through its development, things go slowly at first and then tend to speed up on positive results and price momentum. We believe we have that here with our long-term signals converging to the positive following the recent results driven surge in September.

The charismatic CEO of BNO described their recent results as “Kick-arse” on live TV and she was right, they are – and the price reacted accordingly. The stock doubled from 25c to 50c before pulling back towards support at 35c, which is just below where we find them now. The recent pullback should be a good buying opportunity and if you like growth stories that aim to reward both patients and patience then this is the one for you for you.

Growth Focus: Melbourne IT Ltd (MLB)

by Patrick Taylor




Date of Data Capture: 29/10/2016

Name: MELBOURNE IT LIMITED (MLB)

Classification: Internet Services

Current Price: $1.97

Market Capitalisation: $199M

Forecast EBITDA Growth: 24.91%

Gross Yield: 2.34%

Consensus Price Target: $2.68

# Covering Analysts: 4

Discount at Current Price: 36.04%

Price Target Trend: Increasing

Signal Time Frame: Monthly-Daily

Trend Bias: Up-Flat Long-Short

Indicators:
Short-term: Positive
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: Buy
Focus: Capital Growth

Set up Notes:
• MLB has been making these long, looping recovery rallies all the way up its impressive run since 2011, good long-term correlation and momentum shows they are ready to rally again.
• With the price sitting directly underneath important structural resistance at $2 we can only expect volatility in the near future, but with short-term positive signalling in place it should have some push.
• We could see a short-sharp spring-boarding pullback from resistance here, but we have nearby support layered in at $1.90, $1.80 and $1.70, but a very favourable fundamental outlook rounds out an excellent growth prospect.


Growth Focus: Melbourne IT Ltd (MLB)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

It can sometimes be hard to leave a good legacy, to separate the bad from the good, the shelfware from the showstopper and the ‘not-it’ stocks to the ‘it’ opportunities we look for. We think we have accomplished this somewhat literally this week with our choice of Melbourne IT Ltd (MLB) as this fundamentally strong internet services company enters a technical hot spot and could be about to plug into further gains.

Melbourne IT first hit the on-switch back in 1996 before listing on to the ASX in 1999 - just in time to catch the end of the tech bubble which saw it shoot from $4 to over $10 within 3 months. But by the start of 2000 the tech bubble was cached out, cashed out and ready to pop. The dot.com bust took MLB with it, all the way down to 16c by late 2011 – only to rally again to $2.66 by mid-2007. Another dip lasting until 2011 and a reversal rally later brings us to where we are now with the stock continuing to reboot itself and looking ready to march on.

Currently maintaining the same hard-driving rally since 2011 - best seen as a quarterly very-long-term uptrend - MLB reached a multi-year peak of $2.20 in early 2016 before beginning a deep dive down 25% to $1.65 just 4 months later as a long-term monthly downtrend came and went. This move was caught and well-correlated in the long-term monthly timeframe and it is this same signal that we are following here as it turns positive once again - and just in time to see this rally morphing into a positive longer-term uptrend after this consolidatory period spent de-fragging that growth.

Their fundamentals are a main driver here with excellent growth seen across sales, profits, earnings, and margins – which are forecast to remain connected to strong growth going forward. All four analysts have only positive views and are happily placed with attractive price targets for MLB and foresee no bugs in their system. While Melbourne IT’s share price is just now emerging from one of its, low-looping consolidations, the analysts have not dumped their valuations at all and with remarkable consistency they still hover some 36% higher than where they are currently priced on the market.

The positive signalling, excellent cross timeframe momentum coupled with aggressive fundamental growth leads us to believe that another long-term positive upswing is due to commence. Despite recent shareprice down-time, and even with significant structural resistance looming directly overhead, we are expecting them upload further gains.

Growth Focus: ClearView Wealth Ltd (CVW)

by Patrick Taylor




Date of Data Capture: 19/10/2016

Name: CLEARVIEW WEALTH LTD (CVW)

Classification: Investment Management

Current Price: $1.13

Market Capitalisation: $747M

Forecast EBIT Growth: 21.21%

Gross Yield: 2.63%

Consensus Price Target: $1.29

# Covering Analysts: 3

Discount at Current Price: 14.16%

Price Target Trend: Increasing

Signal Time Frame: Quarterly-Monthly

Trend Bias: Up-Flat Long-Short

Indicators:
Short-term: Positive
Medium-term: Positive Neutral
Long-term: Positive

Recommendation: Buy
Focus: Capital Growth

Set up Notes:
• CVW has historically made steep jumps in value followed by periods of sideways-ranging consolidation before making more steep jumps in value.
• Another jump looks likely again now with good momentum and signalling across most timeframes and are backed by strong fundamental forecasts and performance.
• They have just cleared through some resistance structure at $1.10 and should have blue skies in front of them once past $1.15 and have good support layered down at $1.10, $1.00 and $0.90.


Growth Focus: ClearView Wealth Ltd (CVW)

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

Sometimes it can be hard to see a good opportunity in the market while at other times a company will seem to stand out in stark contrast from the crowd - that is what we see here with Clearview Wealth Ltd (CVW) coming out of consolidation and beginning to step forward once more into the open. Many strongly performing stocks will momentarily pause for breath along their climb in price, ranging down and sideways before eventually resuming their climb. This seems to be the case with Clearview, and with an excellent fundamental outlook and important resistance breaking just last week we think they have further growth in their sights.

Beginning operations in Sydney 1976, Clearview is a wealth management, life insurance, and integrated financial services company that has been seeing remarkable growth, particularly in life insurance and financial advice. Favourable future financial forecasts follow already impressive results, with almost panoramic growth seen continuing across sales, income, profits, earnings and margins. Their 2.63% dividend is not to be overlooked, but our view is that investors should primarily be attracted to the capital growth prospects CVW presents right now and that this potential remains barely hidden in plain sight.

This opportunity is probably best viewed from a medium-term timeframe where we can witness their strong uptrend going through its first steps and entering the landscape back in July 2012. From that vantage point around $0.50 we watched them rally almost 120% over two years to reach its multi-year summit of $1.14 by September 2014.

Since then the price has been taking the scenic route back down south to touch important dynamic support around 85c before heading north once again. Aggressively advancing back through linear and structural resistance we find them standing in front of a vista capped only with blue sky overhead as they have risen above their 2014 peak in just the last few days.

The technical picture looks extremely promising with excellent correlation observed in the longer-term signalling and timeframes, with fresh strength becoming more obvious in the shorter-termed views. That said, we need to remain on the lookout for (and expect) volatility around these kinds of breaks, but we can also observe good support layered down between$1.10 to $1.00 with some decent residual backing stretching down to 90c if things go from spectacular to just plain spectacle.

Strong price action is attractive and should be seen as a good thing - this is what we are following here, though that strength is also supported and clearly flanked by strong fundamentals and technical signalling. With everything now coming into focus, we fully envision Clearview to keep climbing and continue being a scene stealer.


Growth Focus: Decmil Group Ltd (DCG)

by Patrick Taylor




Date of Data Capture: 10/10/2016

Name: DECMIL GROUP LIMITED (DCG)

Classification: Construction & Engineering

Current Price: $1.09

Market Capitalisation: $179M

Forecast EBITDA Growth: 43.43%

Gross Yield: 3.32%

Consensus Price Target: $0.86

# Covering Analysts: 2

Premium at Current Price: 21.1%

Price Target Trend: Increasing

Signal Time Frame: Monthly-Weekly

Trend Bias: Up-Down Long-Short

Indicators:
Short-term: Positive Neutral
Medium-term: Positive
Long-term: Positive

Recommendation: Buy
Focus: Dividend Income & Capital Growth

Set up Notes:
• DCG looks to be in the early stage of a major trend reversal with improving fundamentals and while volatility will be significant so too will the returns if the call is right.
• Good long-term signalling has had our eye on them for a little while now and with the break of $1.00 structural resistance as well as linear resistance 2 weeks ago we think it is time to step forward on this trade.
• Some dynamic resistance around $1.12 is yet to be conquered and should provide some short-term volatility as it looks to test its major dynamic resistance target around $1.40. If it breaks that it could well be a longer-term hold.
• Decent support down to $1.00, any bounce off that should be a good buying opportunity, with further support layered down to 80c.

Growth Focus: Decmil Group Ltd

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

When you aren’t investing directly in strength you at least should be buying the end of weakness. Here we are looking to climb the latter to success with construction engineer Decmil Group Ltd (DCG) as they continue digging themselves out of a financial black hole with strongly improving fundamentals and an exciting technical blueprint.

First breaking ground in Perth 1979, Decmil has grown to be a significant player in the fields of engineering, construction, design, fabrication and maintenance. Accordingly their share price experienced as many up and downs as the business they practice, but with the price and performance of the company continuing to improve we believe they are currently building towards a greater recovery.

While they do pay a significant dividend right now we prefer to treat this stock as a recovery growth play and look to recent contract wins and strategic acquisitions to back excellent forecasts as Decmil engineers a return to robust earnings and excellent forward growth potential. We have to note that while current pricing has them rising above their present consensus price target by around 21%, those aggregate price targets rose by a similar 21% in the last two months alone.

Improving fundamentals do indeed put solid foundations under this stock, but really we are looking for clear technical signalling with high correlation to give us confidence that they are really bridging the gap to further price growth. And we have that here in spades.

The long-term trend began signalling a positive reversal back in June 2016 and was soon followed by a shorter-termed rally into August before successfully retesting that breakout in September. Waiting for the medium-term downtrend to complete lasted until a week ago when that signal turned positive while the price broke through important structural resistance at $1.00 and dynamic resistance sitting closely overhead at $1.02. While there will be volatility during the emergence of this uptrend, the potential here is easy to project going ahead.

Looking back at their price history you can survey a company that falls deeply before making arching rallies in recovery. We believe this could be happening again with previous similar long-term (monthly) buy signals preceding rallies of around 500% in 2009, 100% in 2010, 40% in 2012 and 50% in 2013 – with each one of these rallies following steep falls. And right now they seem to be emerging from their largest collapse in price to date.

There does remain some dynamic resistance currently layered around $1.40 which will be hardened by structural resistance set in place back in 2013 and 2010 - but these levels should also act as natural targets. With this background, combined with sturdy fundamentals supporting exciting technical signalling the time is now to back Decmil as they look to rebuild shareholder value.

Growth Focus: AMA Group Ltd (AMA)

by Patrick Taylor



Date of Data Capture: 26/9/2016

Name: AMA GROUP LTD (AMA)

Classification: Automobiles & Auto Parts

Current Price: $1.11

Market Capitalisation: $525 M

Forecast EBITDA Growth: 23.51%

Gross Yield: 2.73%

Consensus Price Target: $1.34

# Covering Analysts: 3

Discount at Current Price: 20.72%

Price Target Trend: Increasing

Signal Time Frame: Monthly-Weekly-Daily

Trend Bias: Up-Flat Long-Medium

Indicators:
Short-term: Positive Neutral
Medium-term: Positive
Long-term: Positive

Recommendation: Buy

Set up Notes:
• AMA has been consolidating a great rally over the last 12 months after gaining 360% in the 12 months prior.
• Fundamentally strong they have been delivering solid results and retain robust forecasts going forward.
• They are also technically positive with a recent break of linear resistance in August and the $1.00 structure in September, they now have to clear $1.10 previous highs to see blue sky, this is being tested now.
• Some volatility is likely but we see support at $1.00, $0.90 and $0.80 (if it needs the room) but momentum is building and we expect to see it chase its lofty price targets higher from here.


Growth Focus: AMA Group Ltd

Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.

When selecting growth stocks we are really trying to align strong current performance with excellent forecasts with a solid technical outlook and close signal correlation. With AMA Group (AMA) we think we have a great example of this approach and it should be clear to see where the rubber meets the road, and despite the tired cliché, this stock is one we believe could be about to hit top gear... again.

First listing on the ASX in 2006 AMA rallied well and gained about 150% in under a year before they took a turn for the worse as the GFC let the air out of their tyres and saw prices veer close to zero before righting themselves and getting back on the right track. They have shown themselves to be well-versed in crash repairs and since the lows of 2009 we have seen a grinding and gritty performance and a return to strength based on both organic growth and also through acquisitions.

Working primarily through their subsidiaries with a focus on automotive aftercare services, AMA has their businesses activities spread between automotive protection products, panel repair, electrical and component remanufacturing. The most growth has been seen in panel repair where recent investments have increased market share, kept profits humming along and represents an engine of growth going forward.

While they pay a small dividend we are really along for the ride based on capital gains and we aren’t the only ones hitching on, with only three analysts covering the stock it is reassuring that all of them retain positive views only, with current pricing to targets showing a 20% discount in the buyers favour with the consensus view seeing their fair price at $1.34. Couple this with excellent forecasts and there seems to be little that might drag them back or keep them from firing on all cylinders.

The technical picture is just as exciting, with an excellent correlation for the longer-term signalling that has turned to the positive again in the last few weeks, as the stock moved through significant resistance barriers. Their last potential pit-stop remains right at current levels with $1.10 being the price peak achieved on their previous run back in 2007 before the wheels fell off the Global economy.

We should expect some volatility here but it shouldn’t be much more than a small detour on their road of recovery and we do not see any obvious bumps in their ongoing victory lap. The combined strength of the fundamental performance and forecasts - feeding into a technical picture that is speeding up – presents a potential bottleneck formation that seems it might be about to get throttled.

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of RM Capital Pty Ltd (Licence no. 221938). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.