Equities Commentary

Growth Focus: EML Payments Ltd (EML)

by Patrick Taylor



Date of Data Capture: 20/9/2017

Name: EML PAYMENTS LTD (EML)

Classification: Transaction & Payment Services

Current Price: $1.945

Market Capitalisation: $476M

Forecast Sales Growth: 35.9%

Yield Estimate: 0%

Consensus Price Target: $2.03

# Covering Analysts: 4

Discount at Current Price: 4.37%

Price Target Trend: Increasing-Flat

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Flat / Long-Short

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• EML is moving out of a 12-month medium-term consolidation after rising over 200% from late 2015 to late 2016. Right now they are pushing up against $2 resistance but show good fundamental and technical momentum here.
• Earnings growth has been strong over the last two years and this is set to continue with strong forecasting for sales, earnings and profits through to 2020, maintaining steady margins.
• Positive signals cross the major timeframes though expect volatility and a pullback or two before the ceiling breaks to reveal the old peak high target at $2.20 and blue sky above.
• Structural resistance sits at $2.00 and $2.20 with structural support layered from $1.90 to $1.80.



Growth Focus: EML Payments Ltd (EML)

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

When the cards are running hot it makes sense to increase your stake. That is what we are looking to do here with EML Payments Ltd (EML) as the payment solutions company continues to their winning streak of strong earnings and profit growth. With excellent performance and strong forecasting ahead of them, we are confident they will stay ahead of the pack.

Originating from Queensland, EML began dealings in 2003 as a gift card provider but has since grown to offer payment solutions to major global corporates across Australia, Europe and the US. Totalling billions of dollars, these payments are facilitated through over 800 payment, payout, gift and reward programs using physical, mobile and virtual payment cards. With ongoing expansion moving ahead with new contracts and acquisitions in Europe and North America we think the odds are stacked in their favour.

EML has shown excellent fundamental performance and grew earnings by over 50% last year (over 100% the year before) and seem set for continued growth with consensus forecasts upping the ante with strong earnings growth seen carrying through to 2020. Expectations are positive across sales, profits and earnings and the attractive forecasts are supported by high margins that are also set to increase to nearly 80% in the near future. With low costs and good cash flow we see plenty of potential for continued organic growth being bolstered by an acquisitive growth strategy that should see them remain a cut above the rest.

Technically, in the bigger picture we see pricing in the early stage of a potentially significant new long-term uptrend after EML consolidated back by 36% over 12 months from their peak price achieved in late 2016. This peak followed a rally of 266% that began the year prior with a similar long-term signal we are following here again. After basing around $1.50 early in 2017 they broke linear resistance by mid-year and began rally back up to where we find them now, working against $2.00 structural resistance. While we see good momentum across most of the major timeframes, we do expect some volatility and even a potential pullback as the price chips away at that ceiling, but you would need a big blind spot to not see their potential.

With excellent performance, aggressive forecasting and an exciting growth profile backed by strong cash flows, we are happy to chip in and lay our cards on the table as we are confident EML Payments Ltd will continue to come up Trumps.

**Disclosure: Taylor Securities clients and staff may have exposure to the stocks we research and write about.**

Growth Focus: Galaxy Resources Ltd (GXY)

by Patrick Taylor





Date of Data Capture: 8/8/2017

Name: GALAXY RESOURCES LIMITED (GXY)

Classification: Specialty Mining & Metals

Current Price: $1.975

Market Capitalisation: $782 M

Forecast Sales Growth: 65.69%

Gross Yield: 0%

Consensus Price Target: $2.82

# Covering Analysts: 8

Discount at Current Price: 42.78%

Price Target Trend: Increasing-Decreasing

Signal Timeframe: Quarterly-Weekly-Daily

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• A volatile stock and a play on the emergent electrical storage market, GXY carries strong analyst forecasts and sentiment as they look to move into first profits this year with earnings growth seen extending through to 2019.
• Fundamentals are thin due to their stage of development, but with sales, earnings and profit forecasts showing aggressive consensus targeting into next year this could provide a nice short to medium-term entry opportunity.
• Backed by good technicals, we are following the well-correlated medium-term signal here which correctly identified both previous major rallies and is now showing a good potential reversal of their recent 56% dip, with good historical targets


Growth Focus: Galaxy Resources Ltd (GXY)

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

We put our prospective target companies through a battery of fundamental and technical tests in order to connect with prospects having the greatest positive potential. Here we find our interest switching to globally diversified lithium producer Galaxy Resources Ltd (GXY), a stock that truly looks ready to charge ahead.
While the element Lithium is used in pottery, medicine and industrial lubricants, the main driver of growth is seen in its key attributes of high energy density and low weight; combining to make batteries with high charge and power-to-weight ratios. In the burgeoning age of electric vehicles and residential energy storage this will be an important component of the future, and you will not want to remain static on this.

GXY first went live back in 1996, listed in 2007 and remains headquartered in Perth, Western Australia to this day. Somewhat fittingly the history of Galaxy is equal parts positive and negative, but if forward projections are correct, Galaxy has a very bright future ahead of it. And most likely a long one; with large reserves and good geographical diversity achieved through its Canadian and Argentinian operations and also offering strong paths to further growth beyond its primary Australian production moving into profit this year. With a history of extreme volatility this move towards income and stability is important and offers more than just a spark of hope as they look to move beyond past shocks.

Backing this view we have attractive historical performance and encouraging fundamental forecasts with strong growth in sales and earnings seen carrying through to 2019. Analyst sentiment is largely positive and while we have seen consensus valuation targets falling back and following the price lower through the last 8 month consolidation, they still remain some 40% higher than current pricing.

The price history of Galaxy is also one of polar opposites, with extreme highs and lows playing out over the last 10 years - rallying from 50c in 2007 to reach $4 by 2009 and then nearly collapsing by 2015 where they had flattened out around 10c. From those lows began a dynamic recovery where pricing reached highs of $2.90 within a year before pulling back into a 5 month consolidation during 2016. The stock went on to rally and double again by early 2017 before falling back to old support and where we find them right now, working against $2 resistance.

There have been two major rallies and consolidations in the recovery so far, moving in-line with the well-correlated medium-term model that is signalling for a reversal and potential third rally emerging here. Overall, we believe the positives outweigh the negatives, with excellent fundamental forecasts being applied to both the lithium sector and to Galaxy itself. If you like the potential of lithium based on the uptake of electric vehicles and storage then we think you should consider plugging into GXY, they could be a real powerhouse investment.

Growth Focus: Hansen Technologies Ltd (HSN)

by Patrick Taylor



Date of Data Capture: 27/7/2017

Name: HANSEN TECHNOLOGIES LTD (HSN)

Classification: IT Services & Consulting

Current Price: $3.83

Market Capitalisation: $737M

Forecast EBITDA Growth: 25.81%

Gross Yield: 1.69%

Consensus Price Target: $4.24

# Covering Analysts: 4

Discount at Current Price: 10.70%

Price Target Trend: Increasing-Flat

Signal Timeframe: Monthly-Daily

Trend Bias: Up-Down / Long-Short

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Finding buying opportunities in HSN has been difficult as they gained nearly 500% since 2013 within a very robust uptrend – with them consolidating down by around 35% over the last 6 months this could be our chance.
• Fundamentally sound, they have a good history of sustained strong earnings growth – though this dipped going into 2017 it is forecast to get back on track through 2018 and out to 2019.
• Technically sound with good analyst sentiment, we come to them after pricing broke linear resistance in May before rallying to $4 resistance, pulling back to bounce off support around $3.70 which is where they are now.
• With short-term signalling returning to positive we are following the well-correlated long-term model, with good support layered down to $3.


Growth Focus: Hansen Technologies Ltd (HSN)

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

When selecting stocks we tend to start with an inventory of attributes we score, compare and rank. At the end of this process we have a simple ledger of what we believe to be the best of the best – stocks that held good account of themselves in both fundamental and technical terms. This time, billing systems developer Hansen Technologies Ltd (HSN) was headlining our results and is a balanced choice, combining excellent fundamental and technical credentials. Their history of price performance is strong and adds well to their steadily increasing dividend that continues to raise interest.

Charging forth from Doncaster back in 1971, Hansen began as a pioneering internet based customer service company and has evolved to provide supported billing systems to energy and utilities, telecommunications, and pay-tv industries. With reliable and recurring revenue streams HSN has been seen as a defensive play, but also one with enviable performance seen across sales, earnings and profits for the last few years and enviable price growth reflecting that. While 2017 is forecast to be more modest, performance is expected to pick up into and past 2018 and we think they are definitely a stock to keep tabs on.

Even though organic growth has been a key driver behind HSN, they have also tallied up a number of acquisitions on their path to their current position, spanning 45 countries. Just this month a fundraising was done to raise $50M at $3.70 to pay for the takeover of a Norwegian-based energy billing company. This is significant as it fills detail into the bigger picture of an expansive 2018 – but also that this effectively adds a psychological floor of support at $3.70, in addition to the support established during the last months of their seven month correction through to March 2017. With price finding support and breaking resistance it looks like they could be about to make a much more positive statement going forward.

Take note that while they currently offer a good discount this could come in handy with structural price resistance directly overhead at $4.00 - a barrier that held just 4 weeks ago. Even though we expect some continued volatility here, we are following a well-correlated longer-term signal that last triggered back in March 2013, before making a 500% rally over through to 2016. The recent price consolidation is normal within growth cycles and we see this as an opportunistic and advantageous entry point to an otherwise attractive stock.

With an excellent track record behind them and strong forecasts supporting a strong technical outlook, we are reckoning these early whispers of a larger recovery will prove to be anything but idle chit chat.

Growth Focus: OneVue Holdings Ltd (OVH)

by Patrick Taylor



Date of Data Capture: 15/7/2017

Name: ONEVUE HOLDINGS LTD (OVH)

Classification: Professional Information Services

Current Price: $0.62

Market Capitalisation: $163M

Forecast Sales Growth: 61.65%

Gross Yield: 0%

Consensus Price Target: $0.94

# Covering Analysts: 2

Discount at Current Price: 51.61%

Price Target Trend: Increasing Flat

Signal Timeframe: Monthly-Weekly

Trend Bias: Up-Down Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• We have another stock that became a victim of its own exuberant success, running up by 300% during 2015, before falling 50% throughout 2016.
• After clearing through linear resistance in May, OVH has seen an initial price bump up to structural resistance at 65c, which held to push pricing back to test new support at 55 and 60c.
• We have been waiting for a good entry opportunity and for the short-term cycle to turn positive again, which happened a few days ago and we should now see positive momentum combining across multiple timeframes here.
• We have structural overhead resistance targets at 65, 75 and 85c, with good support layered down to 55, 50 and 45c if more volatility ensues.


Growth Focus: OneVue Holdings Ltd (OVH)

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

When making our stock selections we like to take in many different points of view, to scour varying timeframes, access all available valuations and review past performance and future forecasts. This would ironically set us against our selection of OneVue Holdings Ltd (OVH), but with a good balance of fundamental strength and technical allure, we see an investment services company whose improving prospects deserve more than a backward glance.

First appearing on site in Sydney early in 2004 as a platform services provider, OneVue would list on the ASX ten years later having grown into a leading innovator of wealth management technology. Offering administration and distribution services to funds and platforms, and catering to the massive and still growing self-managed superannuation market offers plenty of scope for continued organic growth in addition to their active acquisition strategy. Despite recent purchases they remain cashed up, debt-free and poised to now push through to the point of net return.

We need to highlight that they do not yet make a profit nor offer a dividend – but we are here for growth and OneVue has had plenty of that in the past. Most recently they have been consolidating a major rally, giving fundamentals a chance to catch up with prices that have been falling under the weight of too heavy expectations coming too soon. That consolidation may have ended with their last set of results showed EBITDA growth up over 200% with aggressively strong gains also seen in sales and earnings forecasts, which could see them become cash flow positive this year. This would be an important milestone and would be bound to attract even further attention to this (as yet still small) company that could be about to step into the spotlight.

Despite its modest size, OneVue offers decent liquidity and volume – no doubt this residual attention comes from their remaining under the watchful eyes of many investors still dazzled by their near 300% rally over three months at the end of 2015. From that all-time-high prices ground lower over the next year and a half a clear linear downtrend that broke in May 2017 after falling close to 50%. That resistance break was important and we have since been waiting for positive shorter-term signalling to light up a favourable entry, which we see here and now.

From the May breakout above 55c, pricing rallied to hit old structural resistance around 65c - which held successfully - causing OVH to fall back to test new support at 55 and 60c. With the short-term cycle turning positive we should be able to see increased potential for a bigger break as momentum combines across timeframes. On the upside we have structural resistance targets at 65, 75, and 85c – with decent structural and dynamic support well-layered down from 55 to 45c if we are a cycle early.

OVH has blue chip investors, management with skin in the game, excellent historical growth and very exciting forecasts ahead of them - if you cannot see their potential, you might just not be looking at OneVue the right way.

Growth Focus: Mitula Group Ltd (MUA)

by Patrick Taylor




Date of Data Capture: 29/6/2017

Name: MITULA GROUP LTD (MUA)

Classification: Software & IT Services

Current Price: $0.94

Market Capitalisation: $201M

Forecast EBITDA Growth: 42.52%

Gross Yield: 0%

Consensus Price Target: $1.30

# Covering Analysts: 1

Discount at Current Price: 38.30%

Price Target Trend: Increasing Flat

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up Flat Long-Short

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

Recommendation: Buy
Focus: Capital Growth

Set up Notes:
• MUA is capable of aggressive moves – here we find them working against major resistance which is so far holding down a potential rally backed by good fundamental performance and forecasting that combines well with an exciting, highly-correlated technical setup.
• With earnings growth above 30% last year and even greater growth predicted for the year ahead, MUA should have good newsflow on top of a price target above old highs at $1.30.
• Technically strong with positive multi-timeframe signalling coming through underneath overhead resistance at $1.00, $1.10 and $1.20 - with good support layered down from 90c, 85c and 80c.


Growth Focus: Mitula Group Ltd. (MUA)

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

An investment in patience is normally well rewarded, we hope this will be the case with Mitula Group Ltd (MUA) whose Sanskrit meaning is moderate, meticulous or patient. We think this reflects the situation well and after waiting for the last pullback to complete we are ready to strike as they look poised to run once more.

This Spanish technology company is headquartered in Madrid and took its first steps forward in 2009 before listing on the ASX in 2015. Holding an Australian office in Melbourne, the company operates 104 vertical search websites across 51 countries for clients including Real Estate, Motoring, Cars, Jobs, Holiday Rentals and Fashion. Their global span provides them with good exposure to developing markets across Europe and South America, offering excellent grounds for continued strong growth as they look to raise their stakes.

Following a high margin, low recurring cost business model has allowed them to build a strong cash position and is backed by very strong growth seen across sales, earnings and profits. Last year saw an impressive EBITDA growth rate over 33% and this is forecast to increase a further 40%+ into 2018. One red flag on the fundamental side is their very limited single broker coverage - though this has only just reduced from two and didn’t change aggregate targets significantly. Steering the company we have Chairman Simon Baker taking charge and based on previous experience - and declared acquisition strategy - might be able to turn this debt-free cash cow into a proverbial bull in a China shop.

Technically, they are somewhat erratic in the weekly timeframe we have pictured (their lack of trading time on the ASX reduced the depth of our longer-term signalling too much to use here) but they do show good correlation and positive momentum developing in the medium-term with positive signalling in the long and shorter-termed timeframes. The obvious barrier is overhead resistance at $1.00 and while this sort of round-numbered psychological structure normally represents a significant hurdle, with MUA this may not prove to be a resilient barrier due to the sheer volatility and aggressive nature of the stock. If prices remain penned we have good support layered down to 90 and 85c here, but we would expect pricing to stretch its legs beyond that fence once it is cleared.

With excellent past performance, extremely bullish fundamental forecasts and exciting technical setup we may not have to rely on patience over much after all, if Mitula can keep on doing what it is already doing their pedigree should come to the attention of the greater market faster than you can say vamanos rapido!

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.