Equities Commentary

Growth Focus: PSC Insurance Group Limited (PSI)

by Patrick Taylor



Date of Data Capture: 25/11/2019

Name: PSC INSURANCE GROUP LIMITED (PSI)

Classification: Insurance Brokers

Current Price: $2.95

Market Capitalisation: $800 M

Forecast EBITDA Growth: 16.40%

Yield Estimate: 2.86%

Consensus Price Target: $2.80

# Covering Analysts: 2

Premium at Current Price: 5.08%

Price Target Trend (3-Month): Flat +-0%

Signal Timeframe: Quarterly-Monthly-Daily

Trend Bias: Up-Flat / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• PSI is continuing its recovery after emerging from a minor year-long consolidation five months ago, and this new-found strength is well supported by good reporting and forecasting.
• Performance has shown steady and strong growth from 2015, and this is expected to continue out to 2022 with recent acquisitions in the UK and US paving the way for future growth.
• Pricing shows a healthy move through major resistance structure in June, and then again with minor resistance falling in the last few weeks, the stock is building momentum here, with buy signals present across multiple timeframes.
Support ($): 2.90, 2.80, 2.70, 2.60 & 2.50.
Resistance ($): 3.00, 3.10, 3.20 & clear.


Growth Focus: PSC INSURANCE GROUP LIMITED (PSI)

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

When investing it is necessary to manage risk, and take steps to protect against potential worst-case scenarios, so it seems fitting that we are taking a closer look at PSC Insurance Group (PSI) as the growing underwriting specialist continues higher on good performance and looks like it could be a chance worth taking.

Emerging on the ASX in late 2015, PSI is a diversified insurance services company, operating throughout Australia, New Zealand, the United States, and the United Kingdom. Conducting business through brands like PSC Insurance Brokers, Chase Underwriting and Paragon the company provides services to more than 90,000 customers. The company has been seeing broad-based organic growth but also has a very active acquisition strategy, most recently seen expanding market share in the US and UK.

Performance has been strong and shows increasing revenue, earnings and profits up strongly since 2016, also supporting a fair dividend, though we are primarily attracted to the company for its growth prospects. And indeed the strong trend of expansion is set to continue with forecasts showing expectations out to 2022, primarily driven by strong sales and earnings growth. Analyst coverage is thin, so while there is a slight premium to consensus targets, these valuations are largely static and don’t correlate well to price performance.

Pricing history shows a brief but successful time on the market for PSI, where strong longer-term rallies in 2016 and 2017 were followed by medium-term consolidations before the stock plateaued-out in 2018. Since then the stock has tested overhead resistance at $3.20 twice last year before eventually moving into downtrend taking prices 30% lower by early 2019. Emerging from this constructive base 6 months ago we now find the stock crouched beneath overhead structural resistance at $3, but with good longer-term momentum building, we think they look good here.

With an attractive combination of strong organic growth and an acquisition strategy carving out international market space we believe PSI looks good for an entry here, and if expected gains come through as expected, this expanding insurance company could have you covered.

Growth Focus: Fleetwood Corporation Limited (FWD)

by Patrick Taylor



Date of Data Capture: 7/11/2019

Name: FLEETWOOD CORPORATION LTD (FWD)

Classification: Homebuilding & Construction

Current Price: $2.25

Market Capitalisation: $213 M

Forecast EBITDA Growth: 20.06%

Yield Estimate: 2.28%

Consensus Price Target: $2.54

# Covering Analysts: 3

Discount at Current Price: 12.89%

Price Target Trend (3-Month): Flat -1.55%

Signal Timeframe: Quarterly-Monthly-Weekly

Trend Bias: Up-Down / Long-Medium

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Emerging from a two-year consolidation, this modular accommodation specialist has been showing fresh price strength on good overall performance and is backed by strong forecasts.
• Softer sales took income lower in 2018, and while currently negative this is set to turn back positive in 2020 and remain strong out to 2022, supported by broad gains across sales, margins and earnings, with yield set to improve also.
• Pricing shows a downtrend reflecting the softer performance since 2017, and importantly we see the linear downtrend breaking 2 months ago and then rallying through overhead resistance - we see momentum building across all timeframes.
Support ($): 2.00, 1.75 & 1.50.
Resistance ($): 2.50, 3.00 & 4.00.


Growth Focus: FLEETWOOD CORPORATION LIMITED (FWD)

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

There is often good value in stocks coming out of consolidation, when there is already some blood on the floor and the stock is making a recovery out of a support base. We think we may have that here with Fleetwood Corporation, as the specialist homebuilder breaks out of a long-running downtrend, finds fresh strength on good forecasting and looks ready to move higher all over again.

This is a well-established company, having been listed on the ASX since 1992, and has grown to become a strong player in the niche Modular Accommodation & Construction sector. Also providing more general accommodation solutions and village management services, the company-owned brands include Fleetwood Australia, Modular Building Systems, Searipple, Osprey Village, Camec, NRV and NRC.
Roughly two-thirds of all income stems from its Modular Accommodation business, followed by Parts and Services, and then Village Operations comes in last, but is also seeing the strongest growth.

Fleetwood has been active on the acquisition front, with MBS and NRV being added to the portfolio in the last 12 months, and funding was secured through a mix of a capital raise and asset sales, with further divestment of non-core assets yet to come. The purchase of MBS reflects a key strategy point, as the company looks to secure its leadership status in the modular accommodation space, seen to be a sector bound for expansion and future growth by servicing an improving mining sector.

Performance has been improving steadily since 2017, with good overall growth despite fluctuating revenue and margins, with reporting showing strong earnings growth in 2019. This growth path is seen extending out to 2022, with a very strong pickup in earnings forecast to occur in the two years ahead, and these strong expectations are matched by a strong majority positive consensus analyst sentiment and significant discount to target price projections.

Recent pricing history shows the company making strong gains out of the GFC slump, rallying more than 300% by 2012 before entering a precipitous four-year downtrend, ending with a seemingly minor 200% rally by early-2018. We are following freshly positive long-term signalling here as the stock emerges from a good support base, with linear resistance breaking in September, after pricing fell back into downtrend again over the last two years. Volatility is expected to continue as the stock secures new support, but with an excellent long-term setup and strong forecasting we think it could be a landslide opportunity.

Growth Focus: Western Areas Limited (WSA)

by Patrick Taylor



Date of Data Capture: 23/10/2019

Name: WESTERN AREAS LIMITED (WSA)

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

Indicators:
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.


Growth Focus: WESTERN AREAS LIMITED (WSA)

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

Name: SHINE CORPORATE LTD (SHJ)

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

Indicators:
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.


Growth Focus: SHINE CORPORATE LTD (SHJ)

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

Name: CATAPULT GROUP INT LTD (CAT)

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

Indicators:
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.


Growth Focus: CATAPULT GROUP INTERNATIONAL LTD (CAT)

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.

Disclaimer

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.