In today’s daily we have covered stock research on M2 Group. To view 4 Growth + Dividend Stocks to buy click here

S&P 500was down by 16.94 points or 0.9% to 1867.72 on Tuesday. U.S. stocks fell broadly on Tuesday, closing at session lows, with AIG pulling financial shares lower after disappointing earnings and as a slide in Twitter took down other names in the technology and internet space. Twitter shares tumbled 17.8 percent to $31.85 after the expiration of a six-month "lock-up" period that had restricted the sale of about 82 percent of its outstanding stock.

Despite improving economic data, including a narrowing of the trade gap reported earlier on Tuesday, the S&P 500 is facing a technical hurdle as it nears its all-time high. Adding to a string of major deals in the healthcare industry, Bayer acquired Merck's consumer care business for $14.2 billion. Merck shares fell 2.6 percent to $57.11. Investors continued to watch the situation in Ukraine. The country’s president named a new commander of the ground forces, as the death toll rose in the military’s push to regain control of its easternmost cities from pro-Russian separatists.



S&P 500 Daily Chart   (Source – Thomson Reuters)
 
S&P ASX 200was up by 19.2 points or 0.35% on Tuesday and closed at 5481.4 points. CSR announced ownership interest of Vinva Investment Management representing 5.01% of the total voting power. Lynas share price fell further as it seeks another $40 million from the markets to cover its cash shortfall. The share price closed at 15 cents.

Sydney Airport has completed a $2.5 billion refinancing in the European bond market and Australian Bank Debt markets. David Jones has been able to maintain the momentum in sales by reporting a 4.1% increase in third quarter sales.


S&P ASX 200 Daily Chart (Source – Thomson Reuters)

The top gainers on ASX 200 were:- 




Stock of the Day – M2 Group (MTU)
 
M2 is a telecommunications company which provides fixed phone, broadband and mobile services. This predominantly as a reseller. M2 also sells power and gas services in selected states. The Australian telecoms sector is mature, with elements in long term structural decline yet offset be elements that are structurally growing (mobiles).

Over the past 12 months MTU has outperformed the ASX200 market but underperformed its closest peers IINET and TPG Telecom. We expect MTU to continue to underperform its telecom peers. The outperformance by all players versus the ASX200 has been driven by consolidation of the industry, which has meant significant synergies have been extracted. However as MTU was the last of these players to take part in consolidation it missed the best deals and has seen return on tangible assets along with return on invested capital decline significantly versus peers.




Source - MTU

Added to this we see MTU’s core business (commander 38% of group FY13 revenue) declining, with a revenue compound annual growth rate of negative 6% in FY11 - 14. We expect this decline to continue owing to structural shift away from phone lines, expensive pricing versus peers and increasing competition in the space.


MTU Daily Chart  (Source - Thomson Reuters)
 
Finally MTU will generate synergies from its acquisitions of iPrimus, Dodo and Eftel and we believe this is where MTU is likely to generate vast majority of its earnings growth over the next few years, hence we feel MTU should trade at a discount to peers IIN and TPM which have NBN and organic growth. We believe the stock is overvalued at its current price and would review the stock at a later date.

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