Equities Commentary

Growth Focus: Altium Ltd (ALU)

by Patrick Taylor

Date of Data Capture: 11/6/2019


Classification: Software & IT Services

Current Price: $32.25

Market Capitalisation: $2.86 B

Forecast EBITDA Growth: 46.78%

Yield Estimate: 1.38%

Consensus Price Target: $32.44

# Covering Analysts: 5

Discount at Current Price: 0.59%

Price Target Trend (3-Month): Up-Flat +1.15%

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Flat / Long-Medium

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

Recommendation: Buy

Focus: (Dividend Income) & Capital Growth

Set up Notes:
• Strong running software design company ALU has been moving higher in aggressive cyclical uptrends - with sporadic pullbacks providing entry points - we have that here with the stock underpinned by an equally strong outlook.
• Performance has been excellent with strong growth seen across sales, earnings and profits since 2013, all while increasing margins – this is set to continue with robust forecasts to 2021.
• We are buying into short-term weakness of a strong uptrend, with pricing breaking through linear resistance just days ago as the stock bounced off $30 structural support with good momentum shown across all key timeframes.
Support ($): 30.00, 27.50 & 25.00.
Resistance ($): 35.00 then clear upside.


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

The old market truism of ‘buy strength and sell weakness’ means that you have to be prepared to pay up for good quality stocks and even be willing to buy a company as it makes new highs. Ideally you want the strong technical outlook to be matched by an equally robust fundamental growth story, and we think Altium Ltd might just be an opportunity worth chasing as it emerges from a minor consolidation after hitting all-time-highs earlier this year.

The company has 30 years of trading history and have been listed on the ASX since 1999, in that time they have matured into a dominant operator in the printed circuit board (PCB) market with integrated services ranging from CAD technological design, parts administration and cutting edge production. With the company having a declared intent to dominate its field, we see good organic growth being supplemented by an ongoing strategy of acquisition, and seeing that PCBs are integral to internet connectivity, the underlying market is good and is expected to remain so in the medium to long-term.

Altium already boasts an enviable client list including global giants like VW, BMW, Toyota, NASA, Boeing, Dell and Microsoft, but are also looking to build on this position to secure market leadership with excellent growth seen in Asia and especially in China. The company is in robust condition with no debt, increasing cash balance, and generally strong performance across key markets and an expanding subscriber base, with growth focus to remain in Asia and America.

Strong fundamental performance has been a driving force behind the consistent uptrend of the last few years with consistent gains seen across sales, margins and profits, with forecasts predicting more of the same out to 2021.
Analysts are largely in agreement with an overall positive aggregate view, though it does need to be noted that current target pricing sees the stock at a premium to expectations, though these have been rising sharply in line with stronger performance, and we expect analysts to follow the price higher.

Pricing shows a classic step/stair uptrend with regular consolidation breaks over the last two years as underlying profit growth has accelerated, this should continue and if we are right we should see pricing solidify the breakout from linear resistance near $33 last week. There remains important peak-high structural resistance remaining at $35 but with our weekly/medium-term indicator rolling to the upside with strong signal correlation, we expect price to follow market expectations higher, and while we know we are chasing this one – it could be quite a catch.

Growth Focus: Reece Ltd (REH)

by Patrick Taylor


Date of Data Capture: 31/5/2019
Classification: Construction Supplies & Fixtures
Current Price: $10.38
Market Capitalisation: $5.86 B
Forecast EBITDA Growth: 38.89%
Yield Estimate: 2.15%
Consensus Price Target: $12.58
# Covering Analysts: 2
Discount at Current Price: 20.04%
Price Target Trend (3-Month): Flat +-0%
Signal Timeframe: Monthly-Weekly-Daily
TrendBias: Up-Down / Long-Medium
Short-term: Positive-Neutral
Medium-term: Positive
Long-term: Positive-Neutral

Recommendation: Buy
Focus: (Dividend Income &) Capital Growth

Set up Notes

  • With years of strong domestic performance and earnings growth, REH has pulled back recently after completing a massive acquisition that will almost double revenue and allow access to US markets, expected to significantly boost growth.
  • Consistent sales, earnings and profit gains in Australian and New Zealand operations give a solid foundation for investment, and with the US addition this trend is set to continue further, with strong growth forecasting out to 2021.
  • Reece tends to make cyclical pullbacks within its greater long-term uptrend, and we see fresh signalling here that should combine well with emerging shorter-term positive momentum. 
  • §Support ($): 10.00, 9.75, 9.50 & 9.00.
  • §Resistance ($): 10.75, 11.00, 12.00 & 13.00.

Growth Focus: REECE LTD (REH)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
Having a good business pipeline is essential for a growth company – and here we think we have a sizable opportunity with Reece Ltd (REH) as the construction supplier looks ready to build on recent acquisitions and are set to tap into the US market. 
For a company that is almost one hundred years old, having been listed on the ASX since 1992, Reece continues to adapt and evolve as Australia’s largest plumbing and construction supplies business. With 800 branches across Australia, New Zealand, and the United States, the company offers an attractive growth profile that belies its multi-billion dollar market cap.
Viewing Reece as a growth prospect isn’t difficult as the company already maintains a strong domestic base with solid historical organic growth and excellent underlying fundamental performance, which is supplemented with an active acquisition strategy. Last year Reece completed a number of takeovers, including Heatcraft in Australia and New Zealand, and also acquired MORSCO in the US - a company of similar size, almost doubling the scope of the combined entity.
While it takes time for any acquisition to settle in and reach full benefit, the US acquisition offers significant sales and earnings potential from a business brand already well established across some of America’s most populous states, offering large target markets. The acquisition should see cost savings and beneficial synergies as well as further potential benefits from Reece’s strong business model and innovative move towards digitisation of the product line and improved delivery performance.
Strong fundamental performance will remain a key driver and with an already robust track record of sales, earnings and profit growth since 2013, we gain confidence that forward forecasting is stronger than ever after the US addition. The small dividend is set to increase in significance in the years ahead and aggregate analyst price targets shows a large discount to current pricing with a favourable overall analyst sentiment.
Pricing shows a very long and successful history of value gains through long-running multi-year trends, interspersed with occasional consolidations providing buying opportunities into the pullbacks. We are following a well-correlated long-term signal into this entry as the stock builds a support base above $10 and looks to combine with some shorter-term strength emerging now. It may be large for a growth pick but we believe this plumbing giant will be able to handle the increased liquidity.

Growth Focus: Silver Lake Resources Ltd (SLR)

by Patrick Taylor


Classification: Gold Miner
Current Price: $0.83
Market Capitalisation: $655 M
Forecast EBITDA Growth: 42.21%
Yield Estimate: 0%
Consensus Price Target: $0.87 
# Covering Analysts: 3 
Discount at Current Price: 4.82% 
Price Target Trend (3-Month): Up-Flat +6.10%
Signal Timeframe: Quarterly-Monthly-Daily
TrendBias: Up-Flat/ Medium-Short
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: Capital Growth

Setup Notes

  • SLR looks to be moving into the next stage of recovery as it clears through long-term resistance, backed up by standout performance and very strong forecast growth out to 2021. 
  • Robust earnings have been driving the price recovery higher after the major price slump from 2012-15, and here we see the pattern of increasing sales and profits continuing strongly into next year with solid margins in support.
  • Pricing has broken through a key resistance ceiling at $0.80 and now has no dynamic resistance above it, leaving price free to chase structural resistance levels higher above.
  • Support ($): 0.80, 0.75, 0.70 & 0.65
  • Resistance ($): 0.90, 1.00, 1.25 & 1.50


The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.
Recent strength has returned the shine to Silver Lake Resources as the newly expanded gold producer and explorer looks to continue its recovery track higher on the back of robust performance and glittering forecasts.
Silver Lake listed on to the ASX in late-2007 and remains a gold producer and explorer based in Western Australia, with three mining centers feeding a central mill at its Mount Monger asset. The focus in recent years has been increasing production and high-grade feed while investing in expansion and exploration. This approach has worked well with the company increasing the life of mine in its core assets while eliminating debt and increasing cash balance.
The ability for Silver Lake to increase assets organically has been significantly boosted with the merger with Doray Minerals last month, transforming the entity into a mid-tier operator with complementary operations in WA. The stated focus will initially be in maximising the value of established assets (reporting showed year on year growth of Ore Reserves up 13% and Measured and Indicated Resources up 37%) while also running an active acquisition strategy with plenty of scope for expansion.
Strong fundamental performance has been key to recent strength with increasing sales, margins and profits being seen since 2016, and forecasting shows this trend is expected to stay positive through to 2021. The favourable view is matched by positive analyst sentiment and rising consensus price targets, with valuations increasing in front of price for much of the last two years, and currently offers an attractive discount today's pricing.
Silver Lake enjoyed some good timing by floating on the ASX just prior to the gold-run sparked when the GFC began just a few months later and has since shown a tendency to move up and own in large multi-year trends. With a greater recovery rally underway, the immense price swings that followed the boom and bust of the gold market from 2007-2013 provide key resistance targets for the current uptrend that should have further to go.
Right now we see important resistance barriers being broken as the stock rallied up to current levels, and we think there should be plenty of potential upside remaining for continued outperformance. Strong fundamental expectations combine well with an excellent technical profile showing growing momentum across multiple key timeframes, all of which should add to the current silver-lining.


Growth Focus: MACA Ltd (MLD)

by Patrick Taylor

Date of Data Capture: 2/5/2019
Classification: Mining Support Services
Current Price: $1.05
Market Capitalisation: $276 M
Forecast EBITDA Growth: 38.16%
Yield Estimate: 4.27%
Consensus Price Target: $1.39
# Covering Analysts: 3
Discount at Current Price: 32.38%
Price Target Trend (3-Month): Up +12.5%
Signal Timeframe: Quarterly-Monthly-Weekly
TrendBias: Up-Down / Long-Medium

Short-term: Positive-Neutral
Medium-term: Positive

Recommendation: Buy
Focus: (Dividend Income) & Capital Growth
Set up Notes:
·    MACA is prone to huge price swings played out over multi-year cycles and here it looks like it could be entering into a major uptrend with price breaking through major resistance structures and forecasting showing good growth potential.
·    Performance has been mixed with steady sales growth since 2016 at odds with earnings declines in 2018 (and expected for 2019) before strong profit and margin growth returns next year, with this recovery continuing out to 2021.
·    Pricing and timing needs to be followed closely with MLD due to its extreme volatility, but here we see excellent signal correlation in the long-term showing a high probability for further gains as the stock breaks through linear and dynamic resistance after breaking back above $1 in April.
  • Support ($): 1.00, 0.95, 0.90 & 0.80.
  • Resistance ($): 1.10, 1.20, 1.50 & 1.90.

Growth Focus: MACA LTD (MLD)

The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.

Steep falls don’t always mean deep value but after declining for most of 2018, we see value in mining support services company MACA Ltd as it firms up, with fresh strength being shown since the start of 2019. This price resurgence combines well with excellent forecasting and an exciting technical setup, and we think the recovery has further to run as they continue digging themselves out of a hole.

Listing on the ASX late in 2010, mining support services contractor MACA operates primarily in Australia with some secondary operations in Brazil, providing mining and civil infrastructure services. With operations ranging from mining, crushing and construction services and covering a range of commodities, MACA works with large and small clients, ranging in size from corporate giants like BHP to developing growth prospects like Pilbara Minerals. While MACA has been successful in extending long-term contracts, it is also winning new business and should benefit from the broader market recovery in the mining sector generally and we expect this growth/recovery trend to continue.

The key metric in recovery plays is improving earnings and we like forecasts showing a strong expected increase in revenue and profits in 2020 and out to 2021. Context is important and there remains good potential for a strong return to earnings growth after a softer 2018 saw earnings slide on weaker margins and profits. There are definite signs of strength with consistent sales growth since 2016 set to continue higher and should be a main driver of recovery as margins are expected to begin recovering this year and continue higher into 2021 - setting up a significant bounce in EPS from the lows expected from 2018 and 2019.

The market tends to be forward looking and we can see these more positive expectations beginning to be revealed in fresh share price strength with pricing breaking through important linear and dynamic resistance barriers over the last few months. This sets up higher historical price targets and we see excellent long-term correlation and while we expect some volatility we do see positive momentum signalling also coming through here in the short to medium timeframes and we believe MACA should continue to unearth good value from here.

Growth Focus: Treasury Wine Estates Ltd (TWE)

by Patrick Taylor

Date of Data Capture: 16/4/2019
Classification: Distillers & Wineries
Current Price: $16.16
Market Capitalisation: $11.62B
Forecast EBITDA Growth: 21.97%
Yield Estimate: 2.47%
Consensus Price Target: $18.65
# Covering Analysts: 12
Discount at Current Price: 15.41%
Price Target Trend (3-Month): Flat -0.16%
Signal Timeframe: Monthly-Weekly-Daily
TrendBias: Up-Down / Long-Short

Short-term: Positive
Medium-term: Positive-Neutral

Focus: (Dividend Income &) Capital Growth
Set up Notes:
·    After increasing 4-fold in 4 years, from 2014 to 2018, TWE fell into consolidation until early-2019 when it broke out of linear resistance and began the current recovery we see continuing higher.
·    Performance has been very good for years with stronger sales consistently lifting earnings and profits while the company increased dividend yield and EPS, backed by stronger margins.
·    Pricing shows a strong linear uptrend running from late-2014 to mid-2018, rallying higher by more than 300%, then falling 30% in downtrend,  before recovering off a $14 support base early in 2019, and we expect further gains from here.
§Support ($): 16.00, 15.00, & 14.00.
§Resistance ($): 17.00, 18.00, 19.00 & 20.00.


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

Sometimes it makes sense to reach for top-shelf growth stocks when you are looking for quality and don’t mind spending the money, better yet is when these stocks go on discount. Here we believe we may have just that with Treasury Wine Estates as the winemaker looks to open up a new uptrend backed by strong performance and forecasts that could see investors uncorking a bargain after the recent share price spill.

With key markets stretching across Australia and New Zealand, North America, Europe and Asia - reaching more than 100 countries - Treasury makes and distributes well-known brands such as Penfolds, Beringer, Lindemans and Wolf Blass among many others. The company has been expanding its product range along with its geographical reach and this is set to continue with a renewed focus in adding spirits to their stable as well as pushing further into key Asian, European and American markets.

The winemaker maintains a competitive business model of direct distribution and has been pressing ahead on excellent fundamental performance with a solid history of growth across sales, margins, earnings and profits since 2014 and forecasting sees this continuing through to 2021, with particularly strong expectations for next year. This is expected to continue with the company looking to keep its strong Asian focus, expanding further into China as the group looks to expand its range with more exposure to luxury wines and spirits. Targeted aggressive geographical distribution expansion is not limited to China as TWE looks to take advantage of its competitive edge and make similar moves into the more fractured US and Euro markets.

First listing on to the ASX in mid-2011, the wine maker and distributer has gone through patches of poor performance before more recently becoming the toast of the town with a 300% rally beginning in 2014 and ending in 2018. Here we find them beginning to emerge from a recovery base above $15 and looking like they are ready to make another run at recent highs after falling by almost a third by early 2019. Analyst coverage is broad and majority positive, and despite the current recovery being underway since the start of 2019, it remains trading at significant discount to consensus targets.

Here we see excellent signal correlation and a strong setup as shorter-termed signalling matches up well with longer-term positive momentum and should we see $17 break in the short-term we could very well see the market begin to factor in new strength on top of strong projections that could leave investors in high spirits.


This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). 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.