FIVE GROWTH STOCKS TO BUY

Greencross Ltd

GXL Dividend Details
 
Positive trading Update and growth in addressable market: Greencross Limited (ASX: GXL) provided a snapshot of its trading update at the AGM with first quarter of FY16 illustrating performance as per the expectations with an increase in total revenue (19% growth) and like-for-like sales (6% growth). Addition of 19 new sites to the network was another highlight. The addressable market in ANZ is growing to about $9 billion with a rate of 4% per annum. The firm is targeting at its retail, vet and grooming based growth platforms to boost its market share from 8% (with 332 outlets) to 20% as well as is on track to achieve growth through co-locate stores. Moreover, the like-for-like sales (LFL) rise in the YTD of 2016 fiscal year to some extent addresses the investors’ concerns on its organic growth.
 

Average Customer Spend (Source: Company Reports)
 
On the other hand, the shares of GXL were under pressure witnessing a year to date decline of over 25.40% (as at November 10, 2015) partly due to investors’ concerns over its organic growth and the group’s Chief Executive Officer (CEO), Jeffrey David’s resignation. However, we believe that this recent correction is an opportunity to enter the stock given its attractive valuations and based on the foregoing, we recommend a “BUY” on GXL at the current price of  $5.97
 

GXL Daily Chart (Source: Thomson Reuters)
 

G8 Education Ltd

GEM Dividend Details
 
Changes in DRP positive for shareholders and ongoing network growth: G8 Education Ltd (ASX: GEM) announced about a change to the Company’s Dividend Reinvestment Plan (DRP) that will enable shareholders to receive the benefit of fractional entitlements accrued under the DRP wherein the cash value of the fractional entitlement will be added in the next dividend for the purposes of calculating DRP shares. GEM has a strong network of 457 centers in Australia and 18 centers in Singapore, after adding 21 new centers in first half of FY2015. The group is negotiating to settle 17 more centers, and post this GEM expects to have 35,125 licensed places in Australia. The group delivered 5.6% yoy revenue growth for its 229 centers’ like for like growth during the first half of fiscal 2015 and underlying EPS rose 60% yoy during the same period, proving the group’s capabilities of deriving synergies through acquisitions. On the other hand, the stock plunged over 16.96% (as of November 10, 2015) in the last six months impacted by investors’ concerns over its Affinity takeover battle and the group’s heavy dependence on acquisitions to achieve growth. But, the takeover panel ordered GEM to sell off the affinity shares acquired by the group from taxonomy in excess of 20% of the total voting power in Affinity.
 

Capital Structure (Source: Company Reports)
 
Nonetheless, the stock recovered over 11.37% in the last four weeks (as of November 10, 2015) and we believe this positive momentum in the stock would continue in the coming months driven by government allocations for childcare,which might boost GEM’s centers demand and subsequently drive the group’s price per child revenue. GEM also has an outstanding dividend yield of 7.21% and trading at P/E ratio of 17.73x. We continue to have our bullish stance on the stock and reiterate our “BUY” recommendation at the current price of  $3.30
 
 
GEM Daily Chart (Source: Thomson Reuters)
 
 

Retail Food Group Ltd

RFG Dividend Details
 
Generate growth via international coffee and franchise market penetration:Retail Food Group Limited (ASX: RFG) entered into strategic acquisitions during fiscal year of 2015 to boost its global presence through Cafe2U which is a mobile coffee van franchise; Gloria Jean’s Coffees Group and Di Bella Coffee. Accordingly, RFG boosted its Coffee wholesale EBITDA to $7.7 million during the fiscal year from $0.4 million in FY14. Retail Food group now has over 2,500 franchised outlets across the globe and the group is already leveraging its expanded network and launching it’s Brand Systems in several international markets and even began international distribution hubs and coffee roasting facilities worldwide. Meanwhile, the group estimates a better FY16 for acquisition assets which might contribute over $35 million in underlying EBITDA.
 

Acquisition Scoreboard (Source: Company Reports)
 
RFG stock corrected over 33.48% (as of November 10, 2015) in the last six months and we believe that this correction offers a buying opportunity given its better FY16 outlook and long term potential. The stock also has a dividend yield of over 5.25% and trading at a decent valuation with a P/E of 20.05x. Accordingly, we give a “BUY” recommendation for the stock at the current price of  $4.48
 
 
RFG Daily Chart (Source: Thomson Reuters)
 
 

Freelancer Ltd

FLN Details
 
Ongoing users and projects growth: Freelancer Ltd (ASX: FLN) has 16.8 million users and 8.6 million posted projects after adding over 850,000 users and 450,000 projects during the third quarter of 2015. FLN witnessed over 39% yoy increase in users who post projects or contests while the all-time posted project value reached over $3.97 billion during the quarter. Freelancer’s cash receipts surged by 42% yoy to $9.7 million in Q32015. FLN acquired Escrow.com, a provider of secure online payments and online transaction management for consumers and businesses on the Internet with gross payment volume of US$265 million, net revenue of US$5 million, and EBITDA of $1.2 million in 2014. The acquisition is expected to contribute to 2H15 results.
 

Ongoing users and projects growth (Source: Company Reports)
 
The shares of Freelancer delivered outstanding performance during this year to date increasing by 173.85% and surged over 14.84% in the last four weeks alone (as of November 10, 2015). We remain bullish on the stock and give a “BUY” recommendation at the current price of  $1.77
 
 

 

Nearmap Ltd

NEA Details
 
Solid US segment performance coupled with new patents to boost future growth: Nearmap Ltd (ASX: NEA) reported solid FY15 performance with revenues rising 32% year on year to $23.6 million boosted by rising subscription revenues and higher renewals during the period. But, the group’s profit before tax plunged 82% yoy to $0.6 million, impacted by the US setup costs. On the other hand, NEA’s US segment contributed to the revenues for the first time during the year and the total contracts signed in the region crossed over $100k. Meanwhile, the group won two patent approvals for its new multi-directional oblique views, high-resolution digital elevation models - HyperCamera and HyperCamera 2 and NEA is planning to launch HyperaCamera2 in the first half of 2016 in the US market. Management reported that it estimates a revenue in the range of $28 million to $32 million by end of December 2015. Earlier, NEA reiterated its revenue forecast in the range of $30 million to $50 million in the US by December 2017.
 

Fiscal year of 2015 performance (Source: Company Reports)
 
Meanwhile, the shares of NEA have corrected over 49.24% during the year to date (as of November 10, 2015), impacted by earnings pressure due to heavy US setup costs and tough market conditions. We believe that the group’s efforts in the US would be paid off in the coming years, and increasing awareness, rising penetration and new products launch would drive its business in the coming periods. We reiterate our BUY recommendation to the stock at the current levels of $0.335
 
 
NEA Daily Chart (Source: Thomson Reuters)
 

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