Equities Commentary

Growth Focus: Western Areas Limited (WSA)

by Patrick Taylor

Date of Data Capture: 23/10/2019


Classification: Nickel Ore Mining

Current Price: $3.25

Market Capitalisation: $889M

Forecast EBITDA Growth: 114.11%

Yield Estimate: 1.21%

Consensus Price Target: $3.05

# Covering Analysts: 14

Premium at Current Price: 6.15%

Price Target Trend (3-Month): Up-Flat +17.31%

Signal Timeframe: Quarterly-Monthly-Daily

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Moving higher within a medium-term uptrend WSA looks set to continue its upward journey, backed by steadily improving performance, an exciting technical setup, and strong forecasting.
• Consistent sales growth from 2017 belies a volatile earnings history, with underlying nickel commodity pricing and fluctuating margin levels causing large swings in value, but here we see very strong forecasting expected into next year.
• Pricing shows recent medium-term cyclical price moves with the company still working out of a major long-term downtrend from 2008 highs, we are following long-term signalling here, backed by fresh strength in the shorter-term timeframes.
Support ($): 3.00, 2.75, 2.50, 2.25 & 2.00.
Resistance ($): 3.50, 4.00, 4.50, 5.00 & 6.00.


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

We are always looking for the hottest spots and best areas in the market for emerging growth trends - with the recent strength and excellent outlook for nickel, we think we might be unearthing a bargain with Western Areas as the low-cost producer surges on strong results and forecasting.

Listed on the ASX since mid-2000, Western Areas is an Australian nickel miner/producer with some of the lowest cost and highest grade nickel assets in the world. The company has an active asset development program, with resources and reserves being significantly upgraded in recent years. Ongoing investment into its mines should see growth maintained, with particular focus being given to the underground expansion of the Odysseus mine at Cosmos in Western Australia, offering a long-term mine life at low costings. An active exploration program is maintained with further high-potential prospects in Western Australia and Canada, providing a healthy pipeline for future growth.

Recent results showed strong mining performance offset slightly lower mine grading and currency moves. Increasing nickel pricing saw a boost to cash flow, adding to a good balance sheet recently boosted by the sale of its Kidman stake to Wesfarmers. Recently, the Indonesian government brought forward its planned 2-year ban on nickel exports to January 2020, which should see stockpiling continue to be reduced with LME levels already at 11-year lows, which should provide ongoing price support.

Performance fundamentals have been mostly good, with strong sales growth leading mostly steady gains in earnings, though the softer results of 2019 should give way to a strong 2020, with forecasting showing a strong boost to sales, margins, and earnings expected out to 2021. Analyst sentiment remains strongly majority positive, and while the stock does currently 6% sit above consensus targets, these aggregate valuations have risen 17% in the last 3 months alone.

Since listing on the ASX almost 20 years ago WSA has seen a great many positive and negative cycles, though the current uptrend is really best seen as a greater recovery from a long-running downtrend, in place since mid-2008. The current recovery uptrend began in January 2019, as linear resistance broke and price bounced up off $2 support, and by September price was working on the $3 resistance ceiling, with this level is now turning into support. We see longer-term signalling for a new uptrend beginning here, now gaining some shorter-term momentum, and we think Western Areas could be a great place to be.

Growth Focus: Shine Corporate Ltd (SHJ)

by Patrick Taylor

Date of Data Capture: 8/10/2019


Classification: Personal Legal Services

Current Price: $0.83

Market Capitalisation: $144 M

Forecast EBITDA Growth: 9.70%

Yield Estimate: 4.92%

Consensus Price Target: $1.05

# Covering Analysts: 2

Discount at Current Price: 26.51%

Price Target Trend (3-Month): Flat +2.94%

Signal Timeframe: Quarterly-Monthly-Daily

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: (Dividend Income) & Capital Growth

Set up Notes:
• Shine is offering investors a glimmer of hope here, with good forecasting and strengthening performance combining well with an attractive technical outlook and building momentum.
• Softer earnings in 2018 gave way to more robust expansion in 2019, this is expected to continue through 2022 on improving sales, margins and profits, with a good discount and yield rate adding to its strong capital growth potential.
• Pricing moved lower within linear downtrend for 12 months until mid-2019, and has since rallied up to minor resistance near 85c, though now looks ready to test overhead targets with strong signal correlation across multi-timeframes.
Support ($): 0.80, 0.75, 0.70 & 0.65.
Resistance ($): 0.85, 0.90, 1.00, 1.25 & 1.50.


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

By waiting for stocks to emerge from consolidation you can sometimes locate companies that are just beginning to knock the rust off a new uptrend. We think we may have here with Shine Corporate, as the litigation specialist begins to live up to its name once more, and has been moving higher on positive momentum and attractive forecasting.

Listing on the ASX mid-2013, Shine is a legal services entity specialising in insurance recovery and personal injury practice, with minor but expanding business areas in disability, superannuation, class actions and compensation claims. The company’s core focus remains in damages-related plaintiff litigation and currently operates primary throughout Australia, with early-stage, but growing interests in New Zealand.

The company maintains an active acquisition strategy within largely a fragmented market, this was most recently reflected in the takeover of Carr & Co, and Shine has ongoing plans to grow national footprint and continue growing exposure to overseas markets. Also proactively investing in organic growth the company is involved in building innovative platform technologies with a focus of improve scalability and margins; May 2019 saw the launch of Claimify, a fixed-price algorithmic AI interface capable of predicting case outcomes and dramatically cut settlement periods.

Shine has been showing mixed signs of overall growth, and while sales gains have remained steady, income and earnings showed softer growth in 2018, before picking back up again in 2019. Forecasting currently shows this renewed growth pattern is set to remain steady out to 2022, with increasing profits expected to boost dividend yield above 5% and towards 6% during the same period. Analyst coverage is thin with only two registered valuations, but both of these show very positive sentiment and strong discounts to current price levels.

Pricing history shows a strong run post-float, with the share price more than doubling from 2013 until 2015, before a brutal consolidation brought valuations lower by 85% by 2016. This downtrend had been hard to break, with failed rallies seen in 2016 and 2018, but here we are seeing good structure and momentum emerging as the stock seems ready to move higher again. We are following strongly positive long-term signalling here, well-supported by good momentum in the shorter timeframes and if you like recovery plays, it is easy to make the case for Shine, and it begins to show its value once more and should be sure to catch the eye of investors.

Growth Focus: Catapult Group International Ltd (CAT)

by Patrick Taylor

Date of Data Capture: 13/9/2019


Classification: Recreational Products

Current Price: $1.325

Market Capitalisation: $250 M

Forecast EBITDA Growth: 132.60%

Yield Estimate: 0%

Consensus Price Target: $1.70

# Covering Analysts: 4

Discount at Current Price: 28.30%

Price Target Trend (3-Month): Up-Flat +41.67%

Signal Timeframe: Quarterly-Weekly-Daily

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Wearable analytical tech company CAT has experienced extreme price moves, both up and down, and while we think volatility will continue, earnings are increasing again, forecasting is strong and we see fresh signs of price strength.
• Softer performance in 2017 and 2018 saw pricing crash, but sales, earnings and margins all saw positive gains this year, and strongly positive forecasting and sentiment shows expectations for this to continue gaining through to 2022.
• Pricing broke through major linear resistance in May, ending a 30-month decline, but failed to pierce the $1.50 resistance ceiling overhead, but with good momentum and signalling here we think price is set up and ready to run on again.
Support ($): 1.30, 1.20, 1.10 & 1.00.
Resistance ($): 1.40, 1.50, 1.60, 1.60 & 1.80.


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

Quite often the best bargains on the stockmarket will have charts that look a little ugly, showing the huge declines in value that made them bargains to begin with, but being easy on the eye is rarely easy on the wallet. With that in mind we would like to take a closer look at Catapult Group International Ltd as the sports analytics company begins to show fresh strength, with a share price that has been under siege for years.
Catapult develops, produces and distributes wearable tracking and analytical technology solutions for diverse sporting and athletic clients across the Americas, EMEA, Asia-Pacific and Australia. Utilising local and global satellite positioning systems the company is able to offer highly detailed and accurate macro and micro player movement data to measure performance and tactical efficiencies. This is an emerging and unique growth market with Catapult showing strong sales growth, firming its position as a global leader in this space, with clients covering 39 different sports in 137 countries.
Performance has been mixed, but that is not unusual for a company within an aggressive and early growth phase, and recent reporting showed the company’s first move into positive earnings on strong sales and customer growth, with forecasting showing good expectations for this expansion trend to continue out to 2021. Catapult remains focussed on increasing market share and subscriber growth, as well as continuing to develop its product and service offerings, with particular growth markets identified in the US and Europe. Analysts retain a majority positive sentiment with no outright negative views, and show a strong current discount to consensus targets.
Having listed on the ASX early in 2015, Catapult initially sported a strong rally from $1 to over $4 in under two years, before pulling back by more than 85% over the next 30 months. Since the start of 2019 we have watched the share price rally off the lows and work against (and through) overhead resistance, climbing but ultimately failing to break through mid-year, before pulling back to set-up the current situation we see before us.
Here we think a fresh rally is likely, with momentum building across multiple timeframes, and we think a retest of that resistance is highly probable. If that ceiling should break, there are many historical price targets stretching far higher than the current valuation. We expect volatility to remain as the stock works through overhead resistance up to $1.50 and should that break we think they could swing higher again and could represent a far-flung opportunity.

Growth Focus: National Veterinary Care Ltd (NVL)

by Patrick Taylor

Date of Data Capture: 30/8/2019


Classification: Healthcare Services (Animal)

Current Price: $2.53

Market Capitalisation: $170M

Forecast EBITDA Growth: 22.78%

Yield Estimate: 1.78%

Consensus Price Target: $2.90

# Covering Analysts: 3

Discount at Current Price: 14.62%

Price Target Trend (3-Month): Up-Flat +4.69%

Signal Timeframe: Quarterly-Monthly-Weekly

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• NVL looks like it is entering a new long-term uptrend here after the 50% pullback from record highs completed a few months ago, and is now rallying on strong fundamentals and forecasting.
• Robust performance in 2015 and 2016 lead to an enormous rise in value, before a softer 2018 brought pricing sharply lower - but growth has returned strongly in 2019 across sales, margins and profits, and is expected to continue to 2022.
• Pricing broke free of the major downtrend early in 2019 before working through resistance levels layered up to $2.00, and after a break, spike and retest of support at this level, pricing has moved forward with good momentum shown here.
Support ($): 2.50, 2.25, 2.00, 1.90 & 1.80.
Resistance ($): 2.75, 2.80, 3.00, 3.20 & clear.


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

It can be a winning strategy to use patience and wait for a growth stock to go through a corrective cycle to get a better value entry, and we may have that right here with National Veterinary Care Ltd. The price of this pet services specialist is now emerging from an 18-month down-cycle, coming out of the doghouse with fresh strength, and signalling that a new uptrend might be about to be unleashed.

A fairly recent addition to the ASX, coming onto the boards mid-2015, and already showing some strong success in the veterinary health services sector, operating through self-run clinics and training centres as well as administration and management services throughout Australia and New Zealand. The company is growing organically but also aggressively though acquisition, reporting 32 additions in recent results, but they yet remain minority players within a greatly fractured market, and the acquisition strategy remains active.

Performance has been very strong with revenue gains of more than 43%, earnings up over 37%, driving profit growth of nearly 29% in the last year. This trend is set to stay strong out to 2022 with excellent forecasting seeing growth to continue across sales, earnings and profits while also seeing margins increasing. This outlook couples well with strong majority positive analyst sentiment showing a current discount of nearly 15% to consensus targets, with those aggregate targets rising almost 5% higher still in the last 3 months alone.

Price seems destined to chase old highs soon, with linear resistance breaking in June and fresh signs that a new uptrend could be beginning here with excellent momentum in the longer-termed timeframes. There could easily be some volatility here with the stock sitting right around important resistance structure at $2.50, though we see excellent support layered down from $2.40 to $2.20, with major structure at $2.00. There is a new short-term cycle coming up and we would be looking to buy the dips in the short-term.

A little bit of dividend yield doesn’t hurt but there is plenty of growth story to follow with NVL (though a liquidity warning does apply due to low average volumes) but we do like the strong forecasting combining nicely here with healthy historical performance, and the longer-term pricing picture showing technical setup that looks very fetching indeed.

Growth Focus: Nick Scali Ltd (NCK)

by Patrick Taylor

Date of Data Capture: 19/8/2019


Classification: Home Furnishings

Current Price: $6.82

Market Capitalisation: $552M

Forecast EBITDA Growth: 8.58%

Yield Estimate: 6.63%

Consensus Price Target: $6.23

# Covering Analysts: 3

Premium at Current Price: 8.65%

Price Target Trend (3-Month): Flat +1.47%

Signal Timeframe: Quarterly-Monthly-Weekly

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:
• NCK looks to be emerging from a 29-month consolidation, following a strong multi-year rally that peaked in early 2017, and here we find them winding higher with increasing momentum, backed by good performance and forecasting.
• Previous strong growth levelled off into steady gains over the last two years, but now has forecasts for rising sales, earnings and target prices, supporting an already strong yield play.
• Pricing broke through important $6.50 dynamic resistance earlier this month, after pulling back from higher resistance in June, setting up a new potential longer-term uptrend here with excellent signalling across multiple timeframes.
Support ($): 6.50, 6.00, 5.50 & 5.00.
Resistance ($): 7.00, 7.50 & clear.


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

Sometimes you have to be prepared to take a seat and wait for the right opportunity to come at the right time. We believe we have exactly that here with Nick Scali Ltd as the high performing furniture company finally begins to pad out its growth story and could provide plenty of reasons for investors to think ‘sofa, so good’.

Established 50 years ago and listing on the ASX in 2004, Nick Scali is a household furniture retailer, operating through name-branded stores and also under the Sofas2Go brand. The company has a total current store count of 62, having opened another 5 stores in Australia this year, as well as its second in New Zealand, after opening the first in 2017. The expansion is set to continue with a targeted store count numbering at 80-85 stores, as well as continuing to expand its product range.

Performance has been strong and steady with good long-term growth seen across sales, earnings and profits, whilst maintaining healthy margins. Despite the relatively softer gains seen in 2019, more robust growth is expected to return from 2020 and out to 2022, with stronger sales expected to drive earnings aggressively higher. Dividend yield is already significant and estimated at around 6.6%, though this is expected to move above 7% in the years ahead. It must be noted that the company trades at a premium to consensus price targets, with majority neutral sentiment, though these valuations have been marked up in the last month, something not seen since early 2018.

Technically the price has had a strong run over the last 15 years, going from $1 to just under $7 this month, though really the stock has been caught within a sideways consolidation since peaking at $7.50 in early 2017. Since that high we have seen the price rotate through two medium-term cycles, reaching as low as $5, before building a recovery base to break through linear resistance just 3 months ago. In the time since we have seen pricing successfully retest the resistance/support zones between $6.50 and $6.00 and now has good positive signalling across multiple timeframes.

Right now we see the stock setting up to test structural resistance at $7.00, and looks to be building momentum here with particular strength being shown through the medium and long-term timeframes. With good, broad-based strength and an attractive technical setup we think investors could soon be sitting pretty with Nick Scali.


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.