Equities Commentary

Growth Focus: Pushpay Holdings Ltd (PPH)

by Patrick Taylor



 
Date of Data Capture: 5/4/2019
 
Name: PUSHPAY HOLDINGS LTD (PPH)
      
Classification:Transaction & Payment Services
 
Current Price: $3.25
 
Market Capitalisation: $628M
 
Forecast Sales Growth: 44.54%
 
Yield Estimate: 0%
 
Consensus Price Target: $3.89
 
# Covering Analysts: 2
 
Discount at Current Price: 19.69%
 
Price Target Trend (3-Month): Flat-Down -12.5%
 
Signal Timeframe: Monthly-Weekly-Daily
 
TrendBias: Up-Down / Long-Medium

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

Recommendation: Buy
 
Focus: Capital Growth
 
Set up Notes:
  • PPH is expected to move into positive cash flow this year with excellent sales and earnings growth forecasts – combining well with fresh positive signalling for a continued recovery.
  • While still fairly early-stage, PPH has been growing rapidly within a strong sector – last year saw sales up over 100% and this trend is set to continue with aggressive expectations for sales, earnings and profit growth out to 2021.
  • Pricing fell back by close to 40% throughout 2018 after strong gains of almost 200% in 2017 – here we see a potential new longer-term uptrend emerging with linear resistance breaking late last year and fresh signalling coming through now, with plenty of upside resistance targets.
  • Support ($): 3.00, 2.80 & 2.60.
  • Resistance ($): 3.60, 3.80 & 4.00. 

Growth Focus: PUSHPAY HOLDINGS LTD (PPH)

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

Investing in miracles is not our normal approach – but here we hope to put ourselves in touch with a profit through Pushpay Ltd as the charitable payments provider shows fresh strength and attractive forecasting.
Starting out in the US in 2015 PPH listed onto the ASX in late-2016 and provides specialised mobile commerce and electronic payment solutions to the non-profit, religious and charitable donation market. While still reasonably early-stage the company is growing fast and showing strong gains in key performance areas, while increasing customer revenue and process volumes.
Performance-wise, most of the growth has been seen in sales and customer wins, with the average revenue generated by each customer (per month) increasing by 34.2% over the last year, while sales more than doubled in the same period. Company revenue climbed by almost 50% in the 6-months ending 2018, and in a significant milestone the company became cash-flow positive for the first time in January 2019.
With the first move into real profitability this year we are relying on forecasting to carry some of this recommendation and here we find a favourable analyst outlook for continued aggressive growth in sales expected out to 2021. Importantly we see earnings are set to continue higher, in-step with sales, after the initial surge this year, with EPS seen jumping forward on expanding revenue, profits and stronger margins.
The early-stage aspect of this investment leaves valuations with a volatile track record, but even with consensus target pricing falling by nearly 30% over the last year, there remains a discount to the aggregate valuation by almost 20%, though coverage is thin.
Pricing shows a clear cyclical progression from the 250% rally between early-2017 and mid-2018, being followed by the 30% falls through to late-2018. Earlier this year we saw price bouncing off support near $3 before breaking through linear resistance and rallying hard into a short-term volatility spike before returning to base, which is where we now find them.
Here we see fresh positive indications for a potential new longer-term uptrend forming up and holding good correlation, with shorter-term momentum in support. With an excellent technical outlook combining well with an aggressive fundamental growth forecast we think Pushpay offers an enlightened investment opportunity.

Growth Focus: New Century Resources Ltd (NCZ)

by Patrick Taylor



Date of Data Capture: 22/3/2019
 
Name: New Century Resources Ltd (NCZ)
      
Classification: Zinc Mining
 
Current Price: $0.84
 
Market Capitalisation: $424M
 
Forecast EBITDA Growth: Restarting Production  
 
Yield Estimate: 0%
 
Consensus Price Target: $2.10 (thin coverage)
 
# Covering Analysts: 1
 
Discount at Current Price: 150%
 
Price Target Trend: Flat-Decreasing
 
Signal Timeframe: Monthly-Weekly-Daily
 
TrendBias: Up-Down / Medium-Short

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

Recommendation: Buy
 
Focus: Capital Growth
 
Set up Notes:
·    The refurbishment and recommencement of zinc mining at Century comes with a background market showing increasing consumption and demand, lower grades and stockpiling, and renewed strength in zinc spot pricing in 2019.
·    Century was previously a top 10 global zinc producer and is on track to be so again in 2019, and will do it at a comparably low price and cost ratio, with production ramping up into 2020.
·    Pricing has been volatile with strong gains in 2017 giving way to a major pullback during 2018, but here we see NCZ breaking above resistance on fresh pricing strength and positive signalling.  
• Support ($): 0.80, 0.70 & 0.60.
• Resistance ($): 0.90, 1.00, 1.20, 1.40 & 1.50.

Growth Focus: New Century Resources Ltd (NCZ)

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

It takes discipline to invest in a company that has fallen more than 65% since 2017, but here we are looking to do just that with New Century Resources as the reborn major zinc miner recommences production with a much improved cost base that should galvanise investors.

The Century zinc mine is located near Mt Isa in northern Queensland and operated from 1999 to 2016, becoming one of the largest zinc mines in the world, before production was halted by the previous owners. New management took over the asset and underwent project restart feasibility studies in 2017, highlighting a strong case for extending the life of the mine and realise untapped value in reserves and exploration potential.

Timing is important for any single commodity company and the zinc pricing cycle seems to be working in the new managements favour, with zinc pricing rallying hard after the mine had been shut down, with spot price doubling from 2016 to 2018. For much of the last year we have seen the same spot pricing consolidate that huge rally lower by over 30% by late 2018 before rallying higher again in 2019. This renewed price strength comes coupled with falling global production, increased usage and generally lower level zinc commodity stockpiling, all helping to increase the underlying potential of this project.

The management team is strong with high profile board leadership, and the company boasts a strong internal ownership with over 36% of the company held by the directors and managers. Mine projections offer strong baseline return estimates with production costs set to be in the lowest quartile while maintaining high margins, along with enterprise value being the lowest of any global top 10 zinc miner. Going forward New Century will be looking to initiate dividend payments but really we are here for growth and it adds confidence that a recent executive addition has performance options targets set at $1.20 and $1.50, offering a significant gain from here.

Pricing history has been volatile, but also fairly typical for a company being pulled out of mothballs, with a huge price spike in mid-2017, followed by about 17 months of attrition where the stock was pulled lower by around two thirds. Here we see price bouncing off a $0.60 support base from early-2019, moving higher through linear resistance and setting up a fresh potential long-term uptrend here. We see good long-term positive signal correlation, combining well with shorter-term signalling, and if we are right we should expect to see NCZ knock the rust off its current valuation.

Growth Focus: HUB24 Ltd (HUB)

by Patrick Taylor



Date of Data Capture: 7/3/2019
 
Name: HUB24 LTD (HUB)
      
Classification: Investment Services
 
Current Price: $12.69
 
Market Capitalisation: $785M
 
Forecast EBITDA Growth: 45.61%
 
Yield Estimate: 0.53%
 
Consensus Price Target: $12.89
 
# Covering Analysts: 7
 
Discount at Current Price: 1.58%
 
Price Target Trend: Increasing-Flat
 
Signal Timeframe: Monthly-Weekly-Daily
 
Trend Bias: Up-Flat/ Long-Medium

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

Recommendation: Buy
 
Focus: Capital Growth
 
Set up Notes:
·    HUB is riding a major long-term uptrend, one that is prone to regular sideways consolidations – here price seems ready to move again with fresh positive signalling adding technical strength to a strong fundamental outlook.
·    Performance has been excellent with consistently robust earnings growth since 2015, which is set to continue with forecasting for strong expansion to sales and profits to 2021.
·    Price has been working against $14 and $15 resistance since May 2018 and while we remain under those levels we see good signalling showing here across our key timeframes.  
- Support ($): 12.00, 11.00 & 10.00.
- Resistance ($): 13.00, 14.00, 15.00 (then clear).

Growth Focus: 
HUB24 LTD (HUB)

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

A history of good performance is often a central motivation for buying shares in a company, but so too are expectations for continued growth - and we think we have both here with HUB24 Ltd as the superannuation administration specialist shows signs of renewed strength that could pivot prices higher once more.

HUB24 provides a leading platform for portfolio administration across superannuation, pension, investment and insurance services within Australia; this is an emerging niche in the financial services sector that has seen strong general growth over recent years. Even within this expanding part of the market, HUB still manages to stand out from the crowd with an excellent track record of fundamental growth and price gains to match, with recent results showing total funds under administration increasing by over 20% in just the last six months.

A longer track record shows HUB building strong fundamental performance since 2015, with excellent underlying growth that is still accelerating. In the last 12 months HUB grew sales by 36% and earnings by over 120% - all whilst managing to increase margins by 6%. This growth trend is not expected to stop (or even really slow down) with very robust forecasts stretching ahead to 2021, and analysts calling for continued aggressive expansion across sales, earnings and profits.

Even though the stock currently offers only a small discount to price targets, these valuations normally get dragged higher with price gains. The company has begun dividend payments but really it is growth we are after and in the short-term it should see a nice price bump prior to its addition to the ASX200 at the end of this month. This increased exposure is beneficial but it is also backed contract wins, industry accolades and strong funds under management growth. This upwards momentum is expected to continue and HUB is seen benefitting from the aftermath and adjustments of the recent Banking Royal Commission on the financial sector.

Pricing shows HUB is prone to making sweeping and long-term trends that run in phases, alternating between rallying higher and consolidating sideways. Here we find them beginning to emerge from nine months of containment underneath major resistance at $14, with each test cycling down and coiling into rising support. With long-term signals turning positive and combining well with medium and short-term signalling, we think now is the time to make a core investment in HUB.



Growth Focus: Collins Foods Ltd (CKF)

by Patrick Taylor



Date of Data Capture: 22/2/2019
Name: COLLINS FOODS LTD (CKF)
Classification: Restaurant Management
Current Price: $6.52
Market Capitalisation: $760M
Forecast EBITDA Growth: 18.52%
Yield Estimate: 2.94%
Consensus Price Target: $7.47
# Covering Analysts: 5
Discount at Current Price: 14.57%
Price Target Trend: Increasing-Flat
Signal Timeframe: Quarterly-Weekly-Daily
TrendBias: Up-Flat / Long-Medium

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

Recommendation: Buy
 
Focus: (Dividend Income &) Capital Growth
 
Set up Notes:
·    CKF has been in major uptrend since 2012, cycling higher through rallies and dips - we are looking to take advantage of the most recent pullback by following fresh positive signalling here as price bounces off new major support.
·    Strong sales growth has been a key driver of performance and we expect that to continue with excellent forecasts for expanding earnings, revenue and net margins out to 2021.
·    Pricing is showing important strength here after breaking above linear resistance in late-2018, leading to a steep short-term rally, followed by a successful retest of support this month, offering an attractive entry opportunity right now.
Support ($): 6.50, 6.00, 5.50 & 5.00.
Resistance ($): 7.00 & 7.50 (then clear).

Growth Focus:COLLINS FOODS LTD (CKF)

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

Investors can be well-served by paying attention to companies having minor pullbacks within major rallies, as these moments tend to offer up discounted opportunities for entry. We are doing exactly that with Collins Foods Ltd, as the share price moves out of short-term consolidation, showing good signs of recovery within a greater long-term uptrend, driven by strong performance and appetising forecasts.
Restaurant Manager CKF operate stores of well-known brands like KFC, Sizzler and Taco Bell, throughout Australia, Europe and Asia. The company has been gaining steadily by both organic expansion and active acquisition strategy, with earnings growth being broadly spread across brand and region. Key markets for future growth lie in expanding markets like KFC Europe, Sizzler Asia, as well as the roll-out of the Taco Bell chain in Australia this year.
Collins Foods have shown an excellent track record of strong performance since listing in 2011, and we expect future growth will continue to lead pricing higher with further gains forecast for sales, revenue and earnings out to 2021. This favourable outlook is supported by expected steady margins and lower leverage, with a majority positive analyst consensus that presently offers a 15% discount to current pricing, with targets rising aggressively and up 19% in the last six months.
Despite having a strong longer-term history (with prices almost tripling in the 8 years since floating on the ASX) CKF has periodic, but significant pullbacks that have offered great buying opportunities. After a strong period between late-2012 and early-2017, where pricing rallied almost 650%, the stock entered into a price consolidation for most of 2017 and 2018, eventually pulling prices down by 25% by the start of 2019.
During this time, pricing had been moving slowly lower, working through medium-term cycles, until breaking above linear support 6 months ago, with early strength leading into a sharp rally. This shorter-term uptrend eventually ran out of steam and pricing pulled back to test the breakout zone and successfully bounce off new support level of $6.00 last month before firming up and beginning to push higher in the last few weeks as fresh positive momentum signalling emerged across multiple key timeframes.
With the price now breaking out of this latest minor pullback we are following this new positive momentum, backed by excellent performance and forecasting for an attractive set up that has us thinking that CKF will keep on delivering.

Growth Focus: Ausdrill Limited (ASL)

by Patrick Taylor



Date of Data Capture: 8/2/2019
 
Name: AUSDRILL LIMITED (ASL)
      
Classification: Mining Support Services
 
Current Price: $1.42
 
Market Capitalisation: $972 M
 
Forecast EBITDA Growth: 82.49%
 
Yield Estimate: 5.3%
 
Consensus Price Target: $2.10
 
# Covering Analysts: 7
 
Discount at Current Price: 47.89%
 
Price Target Trend: Flat-Decreasing
 
Signal Timeframe: Monthly-Weekly-Daily
 
TrendBias: Up-Down / Long-Medium

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

Recommendation: Buy
 
Focus:(Dividend Income &) Capital Growth
 
Set up Notes:
·    Strong performance has driven the price recovery of ASL, and despite recent falls, we expect this to continue with excellent forecasting and a strong technical setup signaling further upside gains.
·    Earnings were up almost 30% last year on strong sales growth and improving margins, this is set to continue with further aggressive growth being forecast out to 2021.
·    Price targets have been chasing the stock lower through the recent decline, even though the consensus sentiment is strongly positive and the discount to current pricing is very large.
·    We have multi-timeframe buy signals combining well with major resistance breaking last month.

Support: $1.40, $1.20, $1.10 & $1.00.
Resistance: $1.50, $1.60, $1.80 & $2.00.


Growth Focus: AUSDRILL LIMITED (ASL)

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

When you find yourself in a hole... keep drilling. While not normally the best advice, we are happy to see it work here as Ausdrill continue the strong recovery of the last few years, backed by strong performance and excellent forecasting.
Established in 1987, Ausdrill is now a diversified international drilling and mining services company operating in Australia, India, Africa and Europe for clients like Regis Resources, Hidustan Zinc, Western Areas and Consolidated Minerals. Specialising in open-cut and underground contract mining, ASL offers equipment & supplies, diamond drilling, grading, drill & blast, analysis and logistics.
The company has been on a steady recovery path, bolstered by improving market conditions, strong organic performance and an active acquisition strategy. A focus on high quality investments is well reflected in the aquisition of Barminco late last year, with the company being the recipient of the $113M Rosemont Gold Project contract just last month.
Improving fundamental performance and earnings growth (up 30% last year) has been the key driver behind the ongoing price recovery and this is set to improve further with strong forecasts for sales and margin growth out to 2021. We see demand staying steady to strong, with expected valuations in line with projected contract wins, extensions, and a decent pipeline of new business.
Analyst sentiment is similarly rosy with majority positive consensus price targets offering a steep (40%+) discount to current pricing. It is worth noting that the favourable overall outlook has not changed much, with targets being reduced by only 20% during the 60% price decline that began nearly a year ago.
Unsurprisingly, ASL has a volatile price history that needs to be timed to best advantage. We are following our well-correlated longer-term momentum signal and are looking to enter the stock after price broke through linear resistance last month, after bouncing off a good support to build a recovery base just above $1.00. While there is some structural resistance just above current pricing at $1.50 - with some longer-term dynamic resistance around $1.60 - the more interesting resistance targets stretch higher towards the highs of $2.50 reached only a year ago.
We like the sector, the story and the chart here as we follow positive multi-timeframe buy signals and look to catch a break above $1.50, and although we expect price action to remain volatile, this could become a great core investment.

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.