The Australian Focus List contains our top 13 stock picks across a diverse group of sectors including Diversified Financials, Software and Services, Internet, Communications Equipment, Healthcare Services, Industrial Services, Mining Services, Metals and Mining, Oil and Gas, and Engineering and Construction.
The quarterly report below provides a one-page summary of each company and includes our investment recommendation, potential catalysts, and bull/base/bear target price scenarios. This quarter we include the following companies in the Australian Focus List:
AMA Group Limited (AMA-ASX)
We maintain AMA on our Focus List. We note AMA is expected to exit FY19 with >$600m in annualised Panel Repair revenues and a market share of c9%, which places AMA as comfortably the largest operator in the domestic market, which remains highly fragmented.
Appen Limited (APX-ASX)
We introduce APX to our Focus List. We have sat out long periods of APX’s ascent with a Hold recommendation, concerned that the expanding earnings multiples could revert to a mean and take the stock price down with it. In worrying about the valuation rating, we neglected a key driver of stock price performance, namely earnings momentum and APX retains that in abundance.
Ausdrill Limited (ASL-ASX)
ASL is a diversified mining services group that recently acquired Barminco in a transaction that increases its margins and return metrics, lowers its capital intensity and delivers a more sustainable and longer-term earnings base. The stock is trading on a single-digit PE despite recently reconfirming guidance and securing a large contract win.
Bigtincan Holdings Limited (BTH-ASX)
We introduce BTH to the Focus List. The company is a leading provider of cloud-based sales enablement software and, in our view, BTH is increasingly on the radar of domestic investors as the business matures. BTH’s valuation appears undemanding relative to its mature US/Australian SaaS peers and with improved confidence in its medium-term growth rate and industry dynamics aiding a continued re-rating.
Codan Limited (CDA-ASX)
We include CDA in our Focus List following an earnings upgrade around an investor day in May. We believe there’s good momentum across each division heading into FY20 on the back of new product development, which is improving earnings quality. In addition, we see some optionality around Minetec and also if the balance sheet gets put to work in the form of an acquisition. CDA is also a beneficiary from a lower AUD, and the higher gold price should help gold detector sales.
Cooper Energy Limited (COE-ASX)
COE is on the cusp of delivering its flagship Sole project which should result in EBITDA increasing ~4-fold towards $180mn. With the stock trading at ~5x EV/EBITDA and $17/boe of 2P we continue to believe that the earnings stability (gas contracted at fixed price), low sustaining capex and growth potential is not being fairly valued by the market.
Healthia Limited (HLA-ASX)
HLA listed in September 2018 to capitalise on the increasing demand for allied health services in Australia. Already operating two established allied health businesses in My FootDr Podiatry and All Sports Physiotherapy, and with a combined portfolio of 105 allied health clinics, we think HLA is well positioned as a first mover in consolidating the allied health services industry, which remains highly fragmented.
Independence Group NL (IGO-ASX):
We introduce IGO to the Focus List, with our target price of A$5.65/share implying a potential return of 19%. Our positive view is underpinned by its attractive valuation metrics (fundamentally and relatively), high quality assets and exposure to organic growth via its well-funded (CGe ~A$60m annually) exploration assets.
Kogan.com Limited (KGN-ASX)
We include KGN in our Focus List. KGN is exposed to the structural online mega trend as consumers shift their spending habits from offline to online and we expect the group to return to trend gross profit growth (FY16-FY19 GP CAGR +43% ) as it cycles the earnings trough of 1H19.
Money3 Corporation Limited (MNY-ASX)
We maintain Money3 Corporation on our Focus List. The divestment of the company’s SACC lending operations shores up additional capital and the company is writing record auto loan volumes, which should underpin loan book momentum in FY20.
OZ Minerals Limited (OZL-ASX)
OZL Minerals is our top copper pick with a pipeline of development projects leading by our estimates to EPS growth at 5% pa to FY22. OZL trades at discount to CG mid-cap gold peers (4.0x vs 8x EV/FY20 EBITDA)
Primero Group Limited (PGX-ASX)
We maintain PGX in our Focus List, given its attractive valuation (~3.3x FY19 EV/EBIT), potential near-term catalysts ($800m of qualified tenders) and strong growth profile.
Perseus Mining Limited (PRU-ASX)
PRU remains on our Focus List, with our target price of A$1.00/share implying a potential return of 83%. Our positive view remains underpinned by sector leading production growth driven by the Yaoure development project which is now comfortably financed. We estimate the project will lift Group gold production by +80% by CY22.
Access the Focus List here
We provide a one-page summary of each company with our investment recommendation, potential catalysts and bull/base/bear target price scenarios, which you can access by clicking here.