Equities Commentary

Growth Focus: MACA Ltd (MLD)

by Patrick Taylor



Date of Data Capture: 2/5/2019
 
Name: MACA LTD (MLD)
      
Classification: Mining Support Services
 
Current Price: $1.05
 
Market Capitalisation: $276 M
 
Forecast EBITDA Growth: 38.16%
 
Yield Estimate: 4.27%
 
Consensus Price Target: $1.39
 
# Covering Analysts: 3
 
Discount at Current Price: 32.38%
 
Price Target Trend (3-Month): Up +12.5%
 
Signal Timeframe: Quarterly-Monthly-Weekly
 
TrendBias: Up-Down / Long-Medium

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

Recommendation: Buy
 
Focus: (Dividend Income) & Capital Growth
 
Set up Notes:
·    MACA is prone to huge price swings played out over multi-year cycles and here it looks like it could be entering into a major uptrend with price breaking through major resistance structures and forecasting showing good growth potential.
·    Performance has been mixed with steady sales growth since 2016 at odds with earnings declines in 2018 (and expected for 2019) before strong profit and margin growth returns next year, with this recovery continuing out to 2021.
·    Pricing and timing needs to be followed closely with MLD due to its extreme volatility, but here we see excellent signal correlation in the long-term showing a high probability for further gains as the stock breaks through linear and dynamic resistance after breaking back above $1 in April.
  • Support ($): 1.00, 0.95, 0.90 & 0.80.
  • Resistance ($): 1.10, 1.20, 1.50 & 1.90.


Growth Focus: MACA LTD (MLD)

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

Steep falls don’t always mean deep value but after declining for most of 2018, we see value in mining support services company MACA Ltd as it firms up, with fresh strength being shown since the start of 2019. This price resurgence combines well with excellent forecasting and an exciting technical setup, and we think the recovery has further to run as they continue digging themselves out of a hole.

Listing on the ASX late in 2010, mining support services contractor MACA operates primarily in Australia with some secondary operations in Brazil, providing mining and civil infrastructure services. With operations ranging from mining, crushing and construction services and covering a range of commodities, MACA works with large and small clients, ranging in size from corporate giants like BHP to developing growth prospects like Pilbara Minerals. While MACA has been successful in extending long-term contracts, it is also winning new business and should benefit from the broader market recovery in the mining sector generally and we expect this growth/recovery trend to continue.

The key metric in recovery plays is improving earnings and we like forecasts showing a strong expected increase in revenue and profits in 2020 and out to 2021. Context is important and there remains good potential for a strong return to earnings growth after a softer 2018 saw earnings slide on weaker margins and profits. There are definite signs of strength with consistent sales growth since 2016 set to continue higher and should be a main driver of recovery as margins are expected to begin recovering this year and continue higher into 2021 - setting up a significant bounce in EPS from the lows expected from 2018 and 2019.

The market tends to be forward looking and we can see these more positive expectations beginning to be revealed in fresh share price strength with pricing breaking through important linear and dynamic resistance barriers over the last few months. This sets up higher historical price targets and we see excellent long-term correlation and while we expect some volatility we do see positive momentum signalling also coming through here in the short to medium timeframes and we believe MACA should continue to unearth good value from here.

Growth Focus: Treasury Wine Estates Ltd (TWE)

by Patrick Taylor



Date of Data Capture: 16/4/2019
 
Name: TREASURY WINE ESTATES LTD (TWE)
      
Classification: Distillers & Wineries
 
Current Price: $16.16
 
Market Capitalisation: $11.62B
 
Forecast EBITDA Growth: 21.97%
 
Yield Estimate: 2.47%
 
Consensus Price Target: $18.65
 
# Covering Analysts: 12
 
Discount at Current Price: 15.41%
 
Price Target Trend (3-Month): Flat -0.16%
 
Signal Timeframe: Monthly-Weekly-Daily
 
TrendBias: Up-Down / Long-Short

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

Recommendation:Buy
 
Focus: (Dividend Income &) Capital Growth
 
Set up Notes:
·    After increasing 4-fold in 4 years, from 2014 to 2018, TWE fell into consolidation until early-2019 when it broke out of linear resistance and began the current recovery we see continuing higher.
·    Performance has been very good for years with stronger sales consistently lifting earnings and profits while the company increased dividend yield and EPS, backed by stronger margins.
·    Pricing shows a strong linear uptrend running from late-2014 to mid-2018, rallying higher by more than 300%, then falling 30% in downtrend,  before recovering off a $14 support base early in 2019, and we expect further gains from here.
§Support ($): 16.00, 15.00, & 14.00.
§Resistance ($): 17.00, 18.00, 19.00 & 20.00.

Growth Focus:TREASURY WINE ESTATES LTD (TWE)

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

Sometimes it makes sense to reach for top-shelf growth stocks when you are looking for quality and don’t mind spending the money, better yet is when these stocks go on discount. Here we believe we may have just that with Treasury Wine Estates as the winemaker looks to open up a new uptrend backed by strong performance and forecasts that could see investors uncorking a bargain after the recent share price spill.

With key markets stretching across Australia and New Zealand, North America, Europe and Asia - reaching more than 100 countries - Treasury makes and distributes well-known brands such as Penfolds, Beringer, Lindemans and Wolf Blass among many others. The company has been expanding its product range along with its geographical reach and this is set to continue with a renewed focus in adding spirits to their stable as well as pushing further into key Asian, European and American markets.

The winemaker maintains a competitive business model of direct distribution and has been pressing ahead on excellent fundamental performance with a solid history of growth across sales, margins, earnings and profits since 2014 and forecasting sees this continuing through to 2021, with particularly strong expectations for next year. This is expected to continue with the company looking to keep its strong Asian focus, expanding further into China as the group looks to expand its range with more exposure to luxury wines and spirits. Targeted aggressive geographical distribution expansion is not limited to China as TWE looks to take advantage of its competitive edge and make similar moves into the more fractured US and Euro markets.

First listing on to the ASX in mid-2011, the wine maker and distributer has gone through patches of poor performance before more recently becoming the toast of the town with a 300% rally beginning in 2014 and ending in 2018. Here we find them beginning to emerge from a recovery base above $15 and looking like they are ready to make another run at recent highs after falling by almost a third by early 2019. Analyst coverage is broad and majority positive, and despite the current recovery being underway since the start of 2019, it remains trading at significant discount to consensus targets.

Here we see excellent signal correlation and a strong setup as shorter-termed signalling matches up well with longer-term positive momentum and should we see $17 break in the short-term we could very well see the market begin to factor in new strength on top of strong projections that could leave investors in high spirits.

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.



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.