Seven sector-themed stocks to look at

Netcomm Wireless Ltd

NTC Details
Strong growth in M2M and Fixed Wireless: Netcomm Wireless Ltd (ASX: NTC) reported a Group revenue growth of about 15% to $85.3 million in FY 16 while the revenue from M2M and Fixed Wireless surged 74% to $58.7 million as Ericsson/nbn rollout gained pace. The underlying EBITDA (ex-business reinvestment and share based expenses) grew 23% to $11.2 million during the period. Moreover, NTC has signed a master purchase agreement for Fixed Wireless solution with one of two largest US based telecommunications carriers. The frame purchase agreement is signed with Nokia in July 2016 for the supply of Fixed Wireless devices for their global suburban and rural broadband internet initiative. NTC has developed a fibre to the Distribution Point (FTTdp) solution. Additionally, NTC had raised $1m through SPP and had substantially oversubscribed $50m placement in April 2016.
 


FY 16 Financial Performance (Source: Company Reports)
 
In addition, NTC would pursue FTTdp opportunities in FY 17 and continues to pursue fixed wireless opportunities with particular focus on Europe and USA. NTC is added in S&P/ASX 300 Index effective September 16, 2016. The company’s AGM is scheduled for November 23, 2016. We give a “Hold” recommendation on the stock at the current price of – $2.73

 
NTC Daily Chart (Source: Thomson Reuters)

Nextdc Ltd

NXT Details
Capital raising efforts: Nextdc Ltd (ASX: NXT) has completed $150 million placement in which $45 million has been raised through retail entitlement offer at $3.74 per new share while the institutional entitlement offer helped in raising $56 million. The capital has been said to be used for funding the second Sydney data centre. The group’s revenue has increased 52% to $92.8 million in FY 16, beating the guidance of $85 million to $90 million. EBITDA has increased 247% to $27.7 million in FY 16, meeting the top of its guidance range of $25 million to $28 million. NXT has reported statutory net profit of $1.8 million, as compared to a net loss of $10.3 million in FY 15.


FY 16 Financial Performance (Source: Company Reports)
 
In addition, the company expects the FY17 revenue to be in the range of $115 million to $122 million, up 24% to 31% on FY 16. The EBITDA is expected to be in the range of $46 million to $50 million, an increase of 66% to 80% on FY 16. NXT stock rose 53.9% in the last six months (as of October 04, 2016) and still, we give a “Hold” recommendation on the stock at the current price of – $4.19

 
NXT Daily Chart (Source: Thomson Reuters)

Megaport Ltd

MP1 Details
Loss in FY 16: Megaport Ltd (ASX: MP1) reported a revenue of $2,679,410 in its first 11 months ending 30^th June, 2016 and monthly recurring revenue is up 80% from the beginning of the FY16. The majority of the revenue was generated in the Asia Pacific business units, of which Australia accounts for 86%. Additionally, MP1 has raised capital through a private placement of $17.85M and has completed a Share Purchase Plan to raise a further $13.15 million. This amount would be used for expansion throughout Europe, APAC, and North America as well as staffing and marketing costs and general working capital requirements.
 

FY 16 Financial Performance (Source: Company Reports)
 
On the other hand, the group reported a loss after direct network costs of $1,539,765, which includes direct network costs for the Asia Pacific and North America business units. Moreover, MP1 stock rose over 48.95% in the last three months (as of October 04, 2016) placing the stock at higher levels. We give an “Expensive” recommendation on the stock at the current price of –  $2.79

 
MP1 Daily Chart (Source: Thomson Reuters)

Cochlear Limited

COH Details
Net profit at top end of guidance range: Cochlear Limited (ASX: COH) has reported the sales revenue growth of 23% to $1,158.1 million in its FY 16 results on year on year (yoy) basis. This is the first time the company has reported more than $1 billion of revenue. COH has also reported 30% growth in net profit to $188.9 million, which is at the top end of the guidance range and delivered an EPS growth of 29% to $3.31 per share in FY 16 as compared to FY 15. Additionally, in FY 17, the net profit is expected to be in the range of $210-225 million, which is an increase of around 10-20% on FY16. COH is expecting in FY 17, the continued strong uptake of the Nucleus 6 and Kanso sound processors over the next few years with the current penetration rate for the Nucleus 6 at around 22% of potential recipients. The Chinese Central Government tender units are expected to be at similar levels to FY16 with delivery of units biased for the first half of FY 17.

 

FY 16 Financial Performance (Source: Company Reports)
 
In Europe, COH does not expect any immediate impact on the business from the UK’s decision to withdraw from the European Union. However, the Company remains alert with some level of uncertainty in economic growth and pressure on health budgets. COH expects FY17 R&D expenditure to be broadly in line with that for FY16, which represents a lower percentage of sales revenue. The company announced for the retirement of its Chief Financial Officer by end of current financial year. COH stock already surged 38.04% in the last six months (as of October 04, 2016), placing the stock at higher levels close to its 52-week high price. We believe that the stock is “Expensive” at the current price of – $142.62
 

COH Daily Chart (Source: Thomson Reuters)

Nanosonics Ltd

NAN Details
Maiden profit in FY 16: Nanosonics Ltd (ASX: NAN) reported sales of $42.8 million which indicates a growth of 93% in FY 16 against prior year while the maiden full year profit was of $122,000 with profit of $3.4 million in the second half of 2016. In FY 16, NAN reported the first full year of positive free cash flow of $1.9 million and $48.8 million of cash and cash equivalents.

 

FY 16 Financial Performance (Source: Company Reports)
 
Moreover, North American installed base grew 74% to over 8,700, with the global installed base now over 10,000 units. As a result, NAN stock rose 69.80% in the last six months (as of October 04, 2016) placing the stock at very high levels with unreasonable P/E.  We give an “Expensive” recommendation on the stock at the current price of – $3.38, and would review the stock at a later date.

 
NAN Daily Chart (Source: Thomson Reuters)

Flight Centre Travel Group Ltd

FLT Details
Acquisitions for footprint expansion: Flight Centre Travel Group Ltd (ASX: FLT) recently announced about its footprint expansion efforts in continental Europe through an agreement to acquire corporate businesses owned by European online travel agency eDreams ODIGEO. FLT has acquired a minority interest (49%) in the Gold Coast-based Ignite Travel Group to further diversify its Australian sales network, by investing in an emerging travel business specializing in the development and distribution of innovative leisure market models including exclusively curated holiday packages, travel vouchers and rewards programs. Additionally, FLT reported a strong TTV growth of $1.7 billion in FY 16 as five regions generated good TTV growth during FY16 and FLT is poised to become a $20b a year sales company during FY17.


FY 16 Financial Performance (Source: Company Reports)
 
The underlying PBT exceeded $350m for 3^rd consecutive year and is in line with revised guidance. However, the FY16 profit is adversely affected by investment in growth initiatives that would enhance longer term performance. Moreover, as part of its broader leisure travel growth plan, FLT would mainly expand online during FY17. The online TTV for FY17 is expected to exceed $1 billion. We give a “Hold” recommendation on the stock at the current price of –  $36.14
 

FLT Daily Chart (Source: Thomson Reuters)

Ardent Leisure Group

AAD Details
Continued expansion of Main Event and turnaround for Bowling: Ardent Leisure Group (ASX: AAD) reported core earnings growth of 11% to $62.4 million in FY16 and the revenue increased 15.6% to $687.6 million driven by growth across every division. The Main Event USD revenue increased by 21.6% while USD EBITDA surged 18.7% boosted by expansion of the high?returning, high yield business division with opening of seven centers in the year. The Bowling revenue grew 12.0% on a yoy basis while the division EBITDA grew 30.3% as the strategy to transition from solely bowling to a multi?attraction entertainment business gained momentum.


 FY 16 Financial Performance (Source: Company Reports)
 
The Theme Parks revenue surged 8.0% while EBITDA enhanced 8.5% due to unique experiences and improved customer service. Moreover, AAD’s key driver would be Main Event and the company has planned to open 11 centers in FY 17. The company would continue to implement the turnaround strategy for Bowling. AAD stock rose 40.5% in the last three months (as of October 04, 2016) and the company has a decent dividend yield. Accordingly, we give a “Hold” recommendation on the stock at the current price of – $2.80

 
AAD Daily Chart (Source: Thomson Reuters)

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