Top Ten Picks for August 2016

 
Sirtex Medical Limited



SRX Details

Delivered upper end sales growth for FY16: Sirtex Medical Limited (ASX: SRX) sales of SIR-Spheres Y-90 resin microspheres for the year ended 30^th June 2016 has increased 16.4% over the prior corresponding period (pcp). The sales growth is at the upper end of the 15-17% dose sales guidance provided by the company. But, SRX stock has fallen 19.57% in the last six months (as of August 01, 2016) as investors were concerned over the group’s EMEA performance. On the other hand, the group delivered EMEA full year dose sales growth of 11.2% while APAC delivered a growth of 8.9% as compared to the pcp. We believe SRX would be able to deliver further returns and hence we maintain a “Buy” recommendation on the stock at the current price of  $31.35
 

SRX Daily Chart (Source: Thomson Reuters)
 
Insurance Australia Group Ltd



IAG Details

Positioned to handle the pressure at East Coast: Insurance Australia Group Ltd (ASX: IAG) got around 10,000 claims in respect of the low pressure weather system that has recently impacted much of the east coast of Australia. As per IAG, this event would result in a pre-tax net claim cost in the range of $60-80 million which means its net natural peril claim cost for the FY16 would be over $600 million perils allowance. But the group is well positioned to handle this impact. This is said to be consistent with assumption taken into IAG’s existing reported insurance margin guidance of an outcome at the lower end of a 14%-16% range. Moreover, the group is boosting its capital position and issued NZ$350 million of subordinated unsecured convertible notes in New Zealand. Meanwhile, the stock rose over 18.14% in the last six months (as of August 01, 2016). We maintain a “Buy” recommendation on this dividend yield stock at the current price of $6.06
 

IAG Daily Chart (Source: Thomson Reuters)
 
Spark Infrastructure Group



SKI Details

Boosting capital position: Spark Infrastructure Group (ASX: SKI) reported that they finalized regulatory reset processes in SA Power Networks (SAPN) and Victoria Power Networks (VPN). Victoria Power Networks (Finance) Pty Ltd (VPNF) placed US$500 million of bonds into the USPP market leading to a total proceeds of A$657 million. Meanwhile, the group is divesting its non-core assets and exited their interest in DUET Group. Spark Infrastructure acquired 15% stake in NSW electricity transmission business, TransGrid. Moreover, NSW Electricity Networks Finance Pty Limited (the funding entity for TransGrid) has reached agreement with US investors to place US$700 million and A$75 million of bonds into the USPP market to raise A$1,000 million. Both of the funds raised would be used to repay the debt. Accordingly, the stock has risen 31.94% in the last six months (as of August 01,2016). SKI also has a decent dividend yield. We remain bullish on stock and maintain a “Buy” recommendation on the stock at the current price of $2.64
 

SKI Daily Chart (Source: Thomson Reuters)
 
Magellan Financial Group Ltd



MFG Details

Infrastructure Fund Launched: Magellan Financial Group Ltd (ASX: MFG) has launched an ASX-quoted version of its top-performing listed infrastructure fund. With the recent recovery in the global markets, we believe that the group’s FUM would improve in the month of July post a dip in the month of June 2016 (A$40,495 million against A$42,632 of May 2016).
 


Positive track record (Source: Company Reports)
 
Meanwhile, stock has risen 3.87% in the last one month (as of August 01, 2016). We recommend a “Buy” on the stock at the current price of  $23.09
 

MFG Daily Chart (Source: Thomson Reuters)
 
Mobile Embrace Limited



MBE Details

Expansion of International DCB operations: Mobile Embrace Limited (ASX: MBE) is expanding its international Direct Carrier Billing (DCB) operations into Norway through a new agreement with Telenor Digital. Telenor Digital would provide MBE complete market coverage of Norway’s 5.8 million mobile subscribers. This means that there is a significant carrier billing opportunity to the group as 84% of Norway’s mobile subscribers are postpaid customers. MBE as KNeoMedia’s marketing and distribution partner has helped in the launch of HeroWORLD in Switzerland and Norway. Moreover, MBE has partnered with Telenor Pakistan to expand international DCB operations. We maintain a “Speculative Buy” recommendation on the stock at the current price of  $0.36
 

MBE Daily Chart (Source: Thomson Reuters)
 
Bellamy's Australia Ltd



BAL Details

Growing distribution: Bellamy's Australia Ltd (ASX: BAL) is expanding in tier 1 and tier 2 cities of China despite the country’s recent regulations on infant formula makers. In fact, the confidence on infant formula makers have seen a resurge after the group’s peer issued a positive guidance. Moreover, BAL is now producing in Fonterra which would increase the volume substantially by first quarter FY 17.
 


Multiple distribution channels (Source: Company Reports)
 
The group is also strengthening its management team and appointed Andrew Cohen in the role of Chief Operations & Strategy Officer and Katherine Henry as Executive Director, People and Culture in its senior management team. We maintain a “Speculative Buy” recommendation on the stock at the current price of $12.22
 

BAL Daily Chart (Source: Thomson Reuters)
 
Vitaco Holdings Limited



VIT Details

Geographic expansion via acquisitions: Vitaco Holdings Limited (ASX: VIT) estimates a 23% growth in revenue and 15% rise in EBITDA for FY16 as compared to FY 15. VIT had acquired Musashi in July 2015 which has been said to add EBITDA of $4 million from April 2016. Moreover, VIT has recently entered the UK market through a range of Aussie Bodies protein bars at Boots and is expanding its existing product portfolio in the Middle East. The stock fall by 29.8% in the last six months (as of August 01, 2016) placed the group at attractive levels. We maintain a “Buy” recommendation on the stock at the current price of  $1.65
 

VIT Daily Chart (Source: Thomson Reuters)
 
Touchcorp Ltd



TCH Details

Joined hands with Switzerland’s Cornèr Bank: Touchcorp Ltd (ASX: TCH) has teamed up with Switzerland’s Cornèr Bank to successfully launch a secure online recharge platform for two key Cornèrcard payment products. Currently, Cornèrcard has over CHF$100 million worth of transactions being made each year, but this is expected to grow significantly on the back of further card types and products, and added geographies. TCH is expecting Cornèrcard to add a significant revenue stream for the Company in FY17 and beyond. Moreover, TCG has signed a Software Development & Transaction Services Agreement with Change Up Holdings Limited (Change Up) and has recently completed the first phase of the development services for Change Up. Accordingly, TCH has earned the initial payment of AUD $11.25 million and would continue to be entitled to further payments for transaction processing fees. We give a “Speculative Buy” recommendation on the stock at the current price of $2.28
 

TCH Daily Chart (Source: Thomson Reuters)
 
Woolworths Limited



WOW Details
Selected a new supplier for private label products: Woolworths Limited (ASX: WOW) chose Bega Cheese to offer private label products to the group for daily products like cheese, UHT, adult milk powder and cream. WOW stock has been recovering by 13% in the last four weeks (as of July 29, 2016) as the consumer sentiment has been recovering in Australia. Moreover, the stock has been rising as the group’s restructuring efforts coupled with investments in pricing, customer satisfaction would start delivering benefits in the coming periods. WOW is putting in huge restructuring efforts and implementing a new operating model to enhance accountability and performance. The group thus expects to incur restructuring costs of $959 million or $766 million after tax for financial year 2016. We maintain a “Buy” recommendation on this dividend yield stock at the current price of $23.63
 

WOW Daily Chart (Source: Thomson Reuters)
 
Suncorp Group Ltd



SUN Details

Allowance to withstand claims pressure: Suncorp Group Ltd (ASX: SUN) has received about 8,000 home, motor and commercial claims owing to the low pressure system that affected the east coast of Australia. Accordingly, financial impact in the range of $60 to $80 million is expected by the company. On the other hand, SUN has an allowance of $670 million for the FY 2016 and after taking into account the impact of the east coast storms, Suncorp expects the total natural hazard costs for the year to date to be in line with the annual allowance. The company has announced Kristy Huxtable to be the company secretary effective August 01, 2016.
 


Suncorp operating model (Source: Company Reports)
 
The stock has risen 14.31% in the last six months (as of August 01, 2016), and we believe the positive momentum would continue. Trading at a decent dividend yield, we maintain a “Buy” recommendation on the stock at the current price of $13.44
 

SUN Daily Chart (Source: Thomson Reuters)

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