Equities Commentary

Growth Focus: Bega Cheese Ltd (BGA)

by Patrick Taylor

Date of Data Capture: 20/6/2018
Classification: Food Processing - Dairy
Current Price: $7.52
Market Capitalisation: $1.39B
Forecast EBITDA Growth: 55.81%
Yield Estimate: 1.68%
Consensus Price Target: $7.33
# Covering Analysts: 6
Premium at Current Price: 2.53%
Price Target Trend: Increasing-Flat
Signal Timeframe: Quarterly-Monthly-Daily
Trend Bias: Up-Flat / Long-Medium

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

Focus:Dividend Income & Capital Growth
Set up Notes:
·    BGA goes through cyclical rallies and declines every couple of years, even as the price climbs towards all-time-highs, now we have fresh signs another uptrend could be beginning here.
·    Performance has been good and steady, combining well with very strong forecasts through to 2020 showing robust earnings growth on booming sales in expanding markets.
·    Pricing is looking attractive with linear resistance breaking last month and $7.50 structure cracking right now as the well-correlated longer-term signal turns positive.
·    Only one resistance target remains at $8.00 before the stocks faces blue sky and support is layered down from $7.00 and $6.50 if needed.

Growth Focus: Bega Cheese Ltd (BGA)

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

One of the favoured setups we use when looking to find value is in recovery stocks, especially when companies are consolidating strong multi-year rallies – and this is where we find Bega Cheese Ltd (BGA) churning its way up through resistance levels and seemingly destined to continue its rise to the top again.

BGA is a well-aged dairy collective, established in Bega NSW in 1899 and listed on the ASX in 2011 where it achieved significant success, increasing in value by 300% in the time since. Operating within Australia and New Zealand, this company owns Bega Cheese and Tatura Milk and produces milk, cheese, butter, powders and nutritionals. Recent history shows both strong organic growth as well as an active acquisition strategy which should continue to drive pricing higher and could have a whey to go yet.

Performance has been good with steadily improving sales, margins and earnings over the last few years and this is expected to continue and increase going forward into 2020. Earnings growth is set to return in strength this year with aggressive forecasts seen reflecting the recent boost to growth from its Mondelez International acquisition. Current pricing does sit slightly above consensus price targets though it must be noted that these targets have been steadily rising for years and the overall sentiment of the covering analysts are strongly majority positive with no negative, sour notes curdling the outlook.

Techncially speaking they are at a fascinating crossroads between resistance layered between $7.50 and $8.00, sitting directly above current pricing, and the new potential longer-term uptrend that seems to be emerging here following the linear resistance break earlier this month. This coincides well with a fresh positive signal coming through in the long-term/monthly timeframe, though we have to note there is some weakness in the medium-term/weekly timeframe so we could see some downward pressure and choppy price action before the uptrend re-establishes itself. There is good support down to $7.00 and $6.50 if needed, but with strong signal correlation we could not let this one go past your eyes.

Bega Cheese combines solid fundamental performance and growth potential with an exciting technical setup backed by positive price action and recent resistance breaks. We see BGA as a good growth prospect, ready to chase old peak highs at $8.00 and if this resistance ceiling breaks only blue skies would remain - for investors, that would be udderly legendairy.


Growth Focus: Lifestyle Communities Ltd (LIC)

by Patrick Taylor

Date of Data Capture: 7/6/2018
Classification: Real Estate: Aged Care Living
Current Price: $5.85
Market Capitalisation: $595M
Forecast EBITDA Growth: 18.57%
Yield Estimate: 0.70%
Consensus Price Target: $6.17
# Covering Analysts: 2
Discount at Current Price: 5.47%
Price Target Trend: Increasing-Flat
Signal Timeframe: Monthly-Weekly-Daily
TrendBias: Up-Flat/ Long-Short

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

Focus:Capital Growth
Set up Notes:
·    It may not seem like it but LIC just went through a significant pullback and should be entering a new leg on its five-year 500% long-term uptrend.
·    The last two times this happened was in 2016 and in 2013 and in both occurrences the stock returned to renewed growth and further gains.
·    A strong performer for years, LIC had earnings growth of 40% last year and has increasing sales, margins and profits forecast out to 2020.
·    The price has been running hard in recent weeks and we could see some volatility before cracking $6 resistance overhead, so there could be some useful dips coming for opportunistic entries.
·    No further resistance levels remain above $6.00 and there is good support layered down between $5.50, $5.00 and $4.50 if needed.

Growth Focus: Lifestyle Communities Limited (LIC)       

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

When we search for good investment opportunities we often look for strongly performing companies offering favourable entries off fresh growth signals, but they don’t always look like bargains at first. This is sure to be the case here as we take a closer look at Lifestyle Communities Limited (LIC), currently priced just beneath all-time highs but looking like it has plenty of life in it yet.

Starting out in 2003, Lifestyle Communities develops and operates secure, gated and low-maintenance resort-style retirement villages catering to the over 50 across Victoria and is based in Melbourne. Lifestyle Communities has grown to become one of Australia’s largest aged care property operators, currently managing 16 communities with over 2,800 homeowners, and also have around 1,600 homes being developed and remain wide open for further organic expansion.

General strong growth is expected in this sector catering to Australia’s expanding retiree population and more specifically the aging Boomer demographic. It is this large age group that has defined so many investment trends over the decades and it is now feeding a growth phase in this industry expected to continue for at least the next few decades.

Our positive view is bolstered by LIC showing improved earnings guidance this year, up more than 20% so far in 2018 with analysts majority positive in sentiment. This broad-based aged-sector strength is reflected in forecasts with strong gains seen across sales, margins and profits through to 2020. This is in addition to the current 5% discount to sharply rising aggregate price targets, and should see a steadily increasing dividend yield add to an already vigorous fundamental outlook.

Pricing history tells a happy tale of expansion with the price rallying by over 500% since 2013 and looks set to travel further with a successful test of support near $5 after a sharp 23% fall from recent highs just below $6. Signal correlation in the monthly-frame is good and the signal we are following here has been seen twice before now, in 2013 and 2016 with the third coming this month as pricing rallied hard off $5 support after failing to crack $6 on the first attempt. We view any dips back from this resistance level as ideal for favourable entries.

With aggressive forecasts in front of them and a cresting wave of an aging population behind them we think LIC is still firmly on the growth path and should offer further gains before this long-term uptrend reaches its full maturity.

Growth Focus: QMS Media Ltd (QMS)

by Patrick Taylor

Date of Data Capture: 23/5/2018
Name: QMS MEDIA LTD (QMS)         
Classification: Advertising & Marketing
Current Price: $1.13
Market Capitalisation: $386M
Forecast EBITDA Growth: 39.20%
Yield Estimate: 1.89%
Consensus Price Target: $1.32
# Covering Analysts: 3
Discount at Current Price: 16.81%
Price Target Trend: Increasing-Flat
Signal Timeframe: Quarterly-Monthly-Weekly
TrendBias: Up-Flat-Down / Long-Medium-Short

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

Recommendation: Buy

Focus: Capital Growth
Set up Notes:
·    After a strong starting rally of 100% in a year QMS went through a year of consolidation, falling 30% as it formed a base near $1 before breaking upwards again just a month ago.
·    Performance has been strong since listing and saw earnings growth of nearly 40% last year with similar predictions coming for the year ahead, backed by strong expectations for further growth across sales, margins and earnings.
·    Pricing has good signal correlation and with the breaking of linear resistance in April and additional signs of strength we see a new uptrend emerging here.
·    Resistance targets at $1.15, $1.30 and $1.40 loom ahead and we see good support layered down from $1.10, $1.00 and $0.95 if needed.

Growth Focus: QMS Media Ltd (QMS)

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

We have recently been finding a number of companies in the advertising and marketing rising to the top of our selection criteria, and that should be a good thing as it shows good strength across the sector. Whatever they are selling it has us wanting more as we look at QMS Media Ltd (QMS) as the marketing company looks set to pitch higher.

Listing on to the ASX in 2015, this outdoor advertising specialist operates static and digital billboards as well as retail, transit and street advertising throughout Australia and New Zealand. Already the market leader in New Zealand, QMS has the largest ‘on-field’ media network in Australia with stadium advertising across AFL, NRL, cricket, rugby, netball and soccer. Following strong growth in its digital strategy there is a continued digital billboard roll out, and plenty of growth potential remains through organic or acquisitive growth with the added interest of takeover potential adding some shine.

Not that it needs much polish as performance has been strong with earnings growth of nearly 40% last year and forecasts call for a similar result this year. Yield is still low but should climb above 2% next year and until then this remains a great growth prospect and is undervalued by around 16% against the aggregate analyst valuation.  Forecasts show expectations for increasing sales, margins and earnings, with lower debt, continuing out to 2020 and this is well reflected with the covering analysts being all positive with no negative or neutral views. 

Pricing shows QMS doubling from the $0.65 lows of the mid-2015 listing to peak at $1.40 a year later. Since then we have seen a near-textbook-quality distribution pattern develop into a 21-month falling consolidation taking pricing lower by 32% until last month when linear resistance broke on positive long-term signalling. Immediately overhead we have $1.15-$1.20 resistance after bouncing off base support layered between $0.95 and $1.00. There could easily be an opportunistic buying entry closer to $1.05 if overhead resistance holds in the short-term, but with the emerging long-term uptrend we would be looking to buy dips with an eye on the bigger prize.

QMS Media presents an eye-catching combination of very strong historical performance and excellent forecasts, whilst also showing good technical signalling and positive momentum building in the long-term timeframe. There should be some volatility as price works through $1.15-$1.20, but we would be looking for beneficial entries and think it should continue to pay to advertise with QMS.

Growth Focus: Bingo Industries Ltd (BIN)

by Patrick Taylor

Date of Data Capture:
Classification:Waste Management
Current Price: $2.88
Market Capitalisation: $1.20B
Forecast EBITDA Growth: 25.00%
Yield Estimate: 1.68%
Consensus Price Target: $3.13
# Covering Analysts: 4
Discount at Current Price: 8.68%
Price Target Trend: Increasing-Flat
Signal Timeframe:Monthly-Weekly-Daily
TrendBias: Up-Flat/ Medium-Short

Medium-term: Positive

Focus:Capital Growth
Set up Notes:
·    Strength should be an easy thing to buy but it usually isn’t – here we are looking at a strong combination of fundamental performance and growth combined with a strong technical setup.
·    Performance has been very good since listing early in 2017with strong sales, margins and earnings set to drive forward through to 2020 with aggressive growth set to continue.
·    Technically robust BIN has been cycling higher through a major medium-term uptrend, increasing value by around 60% in the last year.
·    Analyst sentiment is strongly positive with increasing price targets aiming above $3 resistance overhead, with good support layered down to $2.50 from here if needed.

Growth Focus: Bingo Industries Ltd (BIN)

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

We normally avoid rubbish stocks... except when they have excellent growth potential like Bingo Industries Ltd (BIN) which is when we take a “waste, yes/want, yes” approach.

Starting out as a family business in 2005 with 4 trucks, BIN has grown into a $1.2B company with over 250 trucks operating a diverse and integrated waste and recycling company. Based in Sydney with a strong NSW focus, Bingo services the building and demolition industries as well as catering for domestic, commercial and industrial operations and has been making some early stage moves into Victoria and Queensland.

Performance has been strong in the last year with revenue growing by 43% and earnings by 40%. BIN carries forecasts for earnings growth of 25% this year and strong expectations for continued growth out to 2020. A great deal of this growth has been organic, though Bingo have also done the rounds to pick up some strategic acquisitions. With a growth strategy targeting cross-border markets in Victoria and Queensland there should be plenty of room for further growth through either trash or treasure with favourable sector forecasts and opportunities to consolidate a fragmented market.

Of particular interest is the potential shift to own-state processing in NSW that would halt transporting rubbish into QLD, something Bingo has been preparing for through the purchase of the Paton’s Lane site which could be developed into a processing site within NSW. This combines well with the other acquisitions of NRG, Konstruct Recycling, Resource Recovery Victoria and AAZ Recycling as they look to build their national exposure and brand.

Pricing history shows a strong 12 months and 60% rally from their listing date of May 2017 and initial float at $1.80. The uptrend playing out in the medium timeframe has good tracking correlation in the short-term and shows a constructive rally unwinding within a cyclical uptrend. There are no sell signals present as yet and while we do see major structural resistance setting in at the obvious psychological level of $3.00, we also think Bingo have it in the can to continue lifting the lid off expectations.

 We see good momentum building here with buy signals being indicated the over the long-to-medium-term, even though we do see some extension and overreach in the short-term daily timeframe. This means there could be short-term pullback, but this could easily be swept up and away by the longer-termed positivity. Overall we think this is an exciting opportunity that brings together a strong fundamental outlook and an exciting technical viewpoint that makes us not want to curb our enthusiasm.

Growth Focus: IVE Group Ltd (IGL)

by Patrick Taylor

Date of Data Capture: 26/4/2018


Classification: Advertising & Marketing

Current Price: $2.23

Market Capitalisation: $321M

Forecast EBITDA Growth: 37.50%

Yield Estimate: 7.31%

Consensus Price Target: $2.77

# Covering Analysts: 3

Discount at Current Price: 24.22%

Price Target Trend: Increasing-Flat

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Flat / Long-Short

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

Recommendation: Buy

Focus: (Dividend Income &) Capital Growth

Set up Notes:

·    Prone to making strong rallies and then grinding lower through drawn out consolidations, IGL is an attractive stock if you can catch it at the beginning of a new rally, we think that is now.

·    Earnings rose 29% in 2016, 37% in 2017 and further strong growth is forecast across sales, margins and earnings out to 2020, with a current 24% discount to rising consensus target prices.

·    Pricing shows cyclical rallies of 20-30% before slowly pulling back and then running once more - fresh positive signalling is coming through again here across multiple timeframes.

·    Resistance targets sit at $2.25, $2.30 and $2.45 with good support layered down from $2.20, $2.15 and $2.00 if needed.

Growth Focus: IVE Group Ltd (IGL)

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

Communications services provider; Ive Group Ltd (IGL) has been a strong performer for the last few years and has seen their share price cycle upwards, but here we believe the print and promotions specialist could be about to press forward once more.

Opening doors in Sydney 1997, IGL is a leading marketing and print communications provider operating in Australia through four businesses brands; Kalido, Blue Star Group, Pareto Group and IVEO. Growth has been steady to strong over the last few years with 2017 delivering almost 30% earnings growth with positive forecasts in place through to 2020 backed by strong sales and steady to increasing margins. In addition to consistent organic expansion the company has an active acquisition strategy in a sector open to consolidation.

While we normally don’t pay too much attention to dividend yield for our growth stocks, here it is worth mentioning as it is forecast to come in at around 7% which is a significant level of income on a growth stock. Further growth is expected with forecast showing elevated sales and earnings through to 2020, supporting a majority positive consensus sentiment with target pricing showing a current discount of around 25%.

Pricing history shows two major medium-term rallies since listing in late 2015, with each rally consolidating back over time before rallying again. It is happening here again and we see positive momentum signalling across multiple timeframes as the price works off support after breaking linear resistance in December and since successfully tested $2.00 support. 

Some minor structural resistance remain overhead at $2.25 and $2.30 but the main attractive resistance target from here would be the zone between $2.45 and $2.50 that was established in 2017 and 2018, and we have decent structural support layered beneath at $2.15, $2.10 and $2.00. The technical model shows good correlation and looks very promising here, particularly in the medium-term/weekly frame which is on the cusp of turning green right now and should combine well with positive signalling we see in longer and shorter timeframes.

With a strong combination of technical setup and strong fundamental performance and forecasts we like IGL for an entry here on the view that they are likely to continue distributing good news to shareholders.


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.