Equities Commentary

Growth Focus: MNF Group Ltd (MNF)

by Patrick Taylor



Date of Data Capture: 10/2/2017

Name: MNF GROUP LTD (MNF)

Classification: Telecommunications Services

Current Price: $4.86

Market Capitalisation: $327M

Forecast EBITDA Growth: 31.46%

Gross Yield: 1.75%

Consensus Price Target: $5.75

# Covering Analysts: 4

Discount at Current Price: 18.31%

Price Target Trend: Increasing

Signal Time Frame: Quarterly- Weekly-Daily

Trend Bias: Up-Flat ; Long-Medium-Short

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• MNF is riding a strong long-term uptrend interspersed with occasional (mostly sideways) consolidations – the current compression seems to be ending with signs indicating the price may be ready to proceed again.
• With good fundamental performance and forward forecasting backing them, we are given additional confidence from recent aggressive upgrades to target pricing.
• There is some weak negativity in the monthly timeframe but this is outweighed by positive momentum seen in the daily, weekly and quarterly timeframes.
• Resistance remains overhead at $5.00 with good support around $4.50, $4.25 and $4.00.


Growth Focus: MNF Group Ltd (MNF)

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

While the idea of buying a great stock at rock bottom prices can be an attractive dream, the reality is that growth is often built most firmly on previous growth. Strong historical performance also comes with a price but all good big companies were once small companies whose price kept going up. Such is the case here where we need to crane our necks back to focus on MNF Group Ltd (MNF) as the erstwhile My Net Phone continue to increase their net sales, earnings, profits and potential.

This voice over internet protocol specialist and integrated voice services company began business in 2004, listed on to the ASX in 2006 and is headquartered in Sydney. MNF is fast growing, cash accretive and actively acquisitive, having absorbed wholesale voice carrier TNZI in April 2015 and also CCI at the start of this month. While these deals pave the way to future growth the full benefits and synergies tend to take a little while to kick in. This seems to be under full swing with TNZI, though the CCI deal, while having some immediate benefits, will take some time to mature.

Luckily MNF is able to stand on its own two feet when it comes to organic growth with deals struck with Telstra in October of 2016 and the Victorian government earlier this month also. This adds to a now familiar tune of strong fundamental growth that is set to keep on going, with EBITDA up 46 last year and significant growth forecasts ahead. While they do pay a small dividend it is really their growth prospects that bring us to the yard and with 4 analysts giving an aggregate target price of $5.75, some 18.3% higher than here, we are happy to take the line.

If we had one hang up it would be hat they haven’t really had a real drop in the market since the GFC and really the best entries to be found over the last few years have been by elbowing into positions during occasional, mostly sideways, consolidations. They seem to be coming out of a medium-term pullback right now as they crouch beneath their all-time highs and structural resistance at $5.00. We see good short-term momentum looking to connect to longer-term strength here as we dial in clear positive signalling and confirming price action.

We like MNF Group because of its exciting technology combined with strong (founder-led) management. When you add their robust fundamental performance, formidable forecasting and well-correlated technical signals, it becomes difficult to ignore the call to pick up MNF.

** Edit: 14-2-2017 H1 FY17 Results were released before the publication of this article **
MNF has reported strong EBITDA growth of 22% and NPAT growth of 21% - this is slightly under expectations but still very strong. Nevertheless they are currently under pricing pressure so hold off short-term buying until this dip completes and use this as an opportunistic entry. We are happy with our analysis and accordingly this article has been published in original format.

Growth Focus: A2 Milk Company Ltd (A2M)

by Patrick Taylor



Date of Data Capture: 30/1/2017

Name: A2 MILK COMPANY LTD (A2M)

Classification: Food/Dairy Processing

Current Price: $2.11

Market Capitalisation: $1.51 B

Forecast EBITDA Growth: 75.82%

Gross Yield: 0%

Consensus Price Target: $2.42

# Covering Analysts: 4

Discount at Current Price: 14.68%

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

Focus: Capital Growth

Set up Notes:
• A2M looks to be coming out of a long-term sideways consolidation around $2.00 structural resistance over the last 12 months.
• Medium-term signalling has been well-correlated and is turning positive just as they test support at $2.00, established in the break of Nov 2016.
• Fundamental growth forecasts and price targets are strong and their sector has stayed in the spotlight with plenty of attention remaining.
• We are looking to follow early short-term buy signals here with a view to seeing these link-up with positive momentum in the medium and long-term timeframes.


Growth Focus: A2 Milk Company Ltd (A2M)

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

Sometimes it is okay to smile about spilled milk. Such a time was just 2 months ago when a competitor’s curdled results knocked the froth off the dairy sector, dropping a fifth of the share price of the A2 Milk Company Ltd (A2M) into the pale. Since those sour events we have seen them rally from the lows and look to be targeting old highs with potentially more cream on top.

A2 Milk is a vertically integrated dairy goods producer of fresh milk and infant formula with a unique nutritional process and profile based solely on the ‘a2’ milk (beta-casein) protein purported to impart superior health qualities with some early-stage research and good anecdotal evidence to back it up. While these findings are still somewhat contested, their performance needs little in-depth study to understand and since listing early in 2015 at 50c their share price has gained an udderly impressive 500% within two years to peak just shy of $2.50 by late 2016.

Within that period, at the end of 2015 we saw A2 Milk’s share price stampede ahead, running up capital gains of over 300% in 6 weeks after which the share price has been effectively been put out to pasture as the stock works its way through a longer-term consolidation to bed down that extra weight. That has seen the price wedging sideways under resistance set around $2.00 throughout 2016, with A2M breaking through this barrier cleanly in November. After reaching a new all-time high of $2.48 they returned to successfully test support at $2.00 and now with momentum indicators turning positive in good correlation with price action they look ready to lead the field again.

Separating A2M from the herd, and key driver of the price gains, is strong domestic growth throughout Australia and New Zealand as well as good progress being made into huge markets like China, US and the UK. While this offers great and as yet untapped potential, concerns about China were still sloshing through the industry, yet A2 Milk’s management has shrugged off concerns of Chinese regulation changes and so too has the price. With a robust financial standing and very strong growth forecast in sales, earnings, profits and margins we could see the A2M grow into a much larger cash cow.

With good fundamentals and a strong technical outlook we are looking for things to firm and set up from here. This behoves us to believe that A2 Milk are not about to lose their whey but are ready to kick higher. A2M is managing to steer themselves forward with a formula for success and a bullish outlook that investors should find easy to swallow.

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.


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.