Equities Commentary

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

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: 

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
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

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).


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
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

Short-term: Positive
Medium-term: Positive

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.


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.

Growth Focus: WiseTech Global Ltd (WTC)

by Patrick Taylor

Date of Data Capture: 25/1/2019
Classification: Enterprise Software
Current Price: $20.11
Market Capitalisation: $5.86B
Forecast EBITDA Growth: 42.13%
Yield Estimate: 0.21%
Consensus Price Target: $18.45
# Covering Analysts: 7
Premium at Current Price: 8.25%
Price Target Trend: Increasing
Signal Timeframe: Quarterly-Weekly-Daily
Trend Bias: Up-Flat/ Long-Short

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

Recommendation: Buy
Focus: Capital Growth
Set up Notes:
·    Logistics software provider WTC has a good track record of strong fundamental performance pushing impressive price growth – a trend that is set to continue with strong forecasting and fresh positive signalling on display right now.
·    Surging sales and strong margins saw earnings up over 40% last year and that is expected to be repeated again in 2019 - with consistent aggressive growth forecast out to 2021, supported by strong sales and cash flow.
·    Pricing can be volatile but with linear resistance breaking earlier this month and the $20 ceiling breaking this week the set up looks ready to go with resistance targets stretching higher above.
·    Support: $19.00, $18.00, $16.00 & $15.00.
·    Resistance: $22.00, $23.00 & $25.00.


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

Supply chain heavyweight WiseTech Global Ltd has a history of strong performance and we believe they should be able to link together further growth as fresh strength and excellent forecasts predict strong future demand.

Established in 1994, Wisetech has grown into a major international supply solutions company, providing logistics support to over 8000 corporate clients in 130 countries around the world, including many of the largest global operators.  Managing the cutting edge and innovative software as a service platform; CargoWise One, the company provides operational assistance to major supply chains in the execution of over 44 billion transactions every year. While the company has been delivering strong organic growth, this progress is well supported by an ongoing and aggressive acquisition strategy that promises to capture further growth ahead, with recent purchases increasing exposure to large markets in Europe, Asia and the Americas. 

WiseTech has displayed excellent fundamental performance since floating onto the ASX mid-2016, with earnings growth up over 70% in the first full year and further gains of over 44% last year. Analyst forecasts predict 2019 is set to be another good one for investors with earnings set to increase by over 42% this year with only slightly softer growth seen stretching out to 2021. Sales expansion will continue to be the focus as WiseTech pursues new and relatively untouched markets, driving the seemingly ravenous appetite for synergistic overseas acquisitions.

We need to highlight the excellent client retention rate, averaging close to 99% recurring revenue, which should be a strong positive signal and give confidence to investors. Expectations for longer-term strong growth run contrary to subdued consensus target pricing where current values are above expectations - but these targets have been chasing the price higher for much of the stocks trading history and those instances where it has traded at or below fair value have proven to be good buying opportunities.

Earlier this month pricing broke through linear resistance that had formed over the last six months of price consolidation (from highs around $25) and currently shows a very interesting set up where price is currently working against $20 structural resistance. Some whipsawing in the short-term should be expected here as the stock works to break the $20 ceiling and we would look to capitalise on any short-term weakness down to $18 support. Right now we see strong positive signalling combining well with growing momentum across our key timeframes and think it might just be a clever move to pick up some WiseTech.

Growth Focus: Baby Bunting Group Ltd (BBN)

by Patrick Taylor

 Date of Data Capture: 29/11/2018


Classification: Toys & Juvenile Products

Current Price: $2.27

Market Capitalisation: $277 M

Forecast EBITDA Growth: 39.78%

Yield Estimate: 3.64%

Consensus Price Target: $2.67

# Covering Analysts: 4

Discount at Current Price: 17.62%

Price Target Trend: Increasing-Flat

Signal Timeframe: Quarterly-Monthly-Daily

Trend Bias: Up-Down / Long-Short
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

 Focus: Dividend Income & Capital Growth

Set up Notes:

·    BBN looks ready to continue its recovery off fresh price support, and is backed by improving earnings, strong forecasting and signs of a new longer-term uptrend emerging here.

·    An earnings slump over the last year is giving way to renewed growth and a greater recovery seems to be underway - this is backed by favourable expectations for expansion across sales, earnings and yield out to 2021.

·    Pricing broke out of a twenty two month linear downtrend earlier this year, rallying up to major resistance before backing down to successfully retest new support as signalling turns positive.

  ·    Price targets sit higher at $2.50, $2.70 and $3.00 with good support layered down to $2.00, $1.70, $1.60 and $1.50 if required.


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

Patience can help you avoid making rash decisions, and sometimes it can help you get wind of a good opportunity after the market has already spat the dummy. We think we have both here with Baby Bunting Ltd as the children’s toy and clothing company looks to get back to its feet after taking a tumble.

Born in Balwyn 1979, BBN remains based in Victoria and has grown into one of Australia’s leading nursery retailers, operating 50 one-stop-shops catering for children aged 0-3. The company has a wide product offering, ranging from prams and nappies to furniture and food, including well-known brands like Ergobaby, Steelcraft and Bugaboo.

The stock is coming out of a tough year, which was caused in part by the failures of competitors and the knock-on effects of clearance sales affecting profits in the short-term. Hidden within this price decline is a great opportunity for enhanced recovery as it looks to capture this abandoned market share while also increasing own-label sales. Roughly seventy competitor stores have left the market and this offers a rare opportunistic market window and management are looking to drive growth with plans to ramp up to eighty stores, with five already opening in 2018, with two more expected by Christmas.

The slow 2018 is already starting to give way to new growth, with a recent update reporting stronger earnings and analyst consensus forecasts predict further strong growth out to 2021. There is a decent 3.8% dividend yield here that is set to continue rising past 5% within the next two years – but our main focus is capital growth and we like the broad expectations for aggressive sales, margins and earnings growth going forward.

Pricing has benefitted from the early signs of recovery with recent reporting helping to lift BBN out of a two-year downtrend mid-2018, with a sharp rally raising prices up from $1.50 to meet resistance at $2.50 before falling back to successfully test new support at $2.00 in recent weeks. With prices rebounding off support BBN now looks ready to go higher with positive signalling present across short, medium and long-term timeframes. We expect price to follow earnings higher and with a great recovery background picture, and exciting technical setup, we think Baby Bunting could be about to experience a newborn uptrend.



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.