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
Medium-term: Positive Neutral
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.