Key details for the stocks

  MNF Group Ltd

Secured MVNO deal with Telstra Wholesale: MNF Group Ltd (ASX: MNF) has secured a mobile virtual network operator (MVNO) deal with Telstra Wholesale which would expand its service suite to include 4G and 3G mobile services across its Domestic Retail and Domestic Wholesale Segments to deliver a complete communications solution. However, MNF stock already generated 41.21% in the last six months (as of October 05, 2016), placing the stock at a high P/E and close to its 52-week high price. We believe that the stock is “Expensive” at the current price of – $4.85

Telstra Corporation Ltd

Limited top line growth remains a concern: Telstra Corporation Ltd (ASX: TLS) recently appointed an experienced director and former Accenture regional managing director Jane Hemstritch, 62, as a non-executive Director. In addition, TLS has announced $1.5 billion of share buy back in the first half of FY17, comprising a $1.25 billion off-market share buy-back and a $250 million on-market share buy-back. Despite these efforts, we believe TLS stock would continue to be under pressure which reported only 1.9% growth in revenues while net profit after tax surged to $5.8 billion in FY16. Australia Competition and Consumer Commission put another inquiry with regard to group’s mobile roaming services. TLS stock fell 6.53% in the last three months (as of October 05, 2016), and we remain bearish on stock. We give an “Expensive” recommendation on the stock at the current price of – $5.06

Norwood Systems Ltd

Boosting capital position: Norwood Systems Ltd (ASX: NOR) has released its Annual Report and the Audited Financial Statements for the year ended 30^th June 2016, which showed the net loss of $16,656,439 due to the significant investment made in technology and marketing. The company gave first full year of operation since listing on the Australian Securities Exchange. On the other hand, NOR has completed a $3.5 million capital raising prior to 30^th June 2016 which ensured NOR to be fully funded for FY17. NOR’s capital requirements will be lower than FY16 due to the prioritization on business sales (Corona). With the stock falling 77% in this year to date (as of October 05, 2016), we believe investors can leverage this bargain opportunity. Accordingly, we give a “Speculative Buy” recommendation on the stock at the current price of – $0.023

   Mobile Embrace Ltd

Launched MBE Performance Marketing business in Four Middle East Countries: Mobile Embrace Ltd (ASX: MBE) has launched the rollout of the cloud-based performance marketing technology platform into Saudi Arabia, Qatar, Egypt and Bahrain to strengthen the mobile digital performance marketing operations. MBE also released about 4 million fully paid ordinary shares from voluntary escrow. Moreover, MBE has exceeded the guidance in FY 16 as it reported the 83% increase in the revenue to $60.6 million and 86% increase in the EBITDA to $9.5 million. We give a “Speculative Buy” recommendation on the stock at the current price of –   $0.29

BigAir Group Limited

Acquisition by Superloop: BigAir Group Limited (ASX: BGL) is being acquired by the Superloop and is subject to shareholder approval, court approval, and other necessary approvals. BGL and Superloop Limited has entered into a Scheme Implementation Deed wherein Superloop would buy entire equity of BigAir. The financial close is expected in December 2016. After the acquisition, BGL service offerings would be restructured and rebranded to create a fully integrated and focused managed service provider business. BGL stock rose 58.2% in the last three months (as of October 05, 2016), and we give a “Hold” recommendation on the stock at the current price of – $1.06

TPG Telecom Ltd

Concerns over debt: TPG Telecom Ltd (ASX: TPM) reported a 69% increase in the Net Profit After Tax (NPAT) of $379.6m in FY 16 and 61% increase in the earnings per share to 45.3 cents per share. TPM has a bank debt of $1,350m and a net debt to EBITDA leverage ratio of about 1.8x at the end of the FY 16. Moreover, in FY 17, TPM expects the underlying EBITDA for the group to be in the range of $820m to $830m. Despite the stock falling 34.5% in the last one month (as of October 05, 2016), the stock is trading at a higher P/E. We give an “Expensive” recommendation on the stock at the current price of – $8.21

Chorus Ltd

Major contract to HRL Holdings: Chorus Ltd (ASX: CNU) stock fell 9.5% in the last one month (as of October 05, 2016), as the group’s operating revenue and the net profit after tax remained flat in FY16 when compared to corresponding period of FY 15. CNU expects the EBITDA will be in the range of $625 - $645 million in FY 17 and the capital expenditure in the range of $610 - $650 million. Mark Ratcliffe has given the notice of his intent to step down as Chorus CEO and Managing Director around the middle of next year. On the other hand, the group has awarded a significant contract to HRL Holdings Limited to carry out hazardous material surveys across its extensive property portfolio throughout all of New Zealand. The group is expecting a better dividend in FY17 against FY16. We give a “Speculative Buy” recommendation on the stock at the current price of – $3.64

Speedcast International Ltd

High Leverage Ratio: Speedcast International Ltd (ASX: SDA) has received $10.7 million in applications under share purchase plan. The group otherwise had reported a 41% growth in the statutory revenue to USD101.5 million through acquisitions and organic growth for first half of 2016. The underlying NPATA, excluding non-recurring costs increased 21% to USD8.2 million, period-on-period. The Leverage ratio has increased to 2.8x as compared to 2.7x in FY 2015 reflecting the increased debt requirements to fund acquisitions. Trading at a high P/E, we give an “Expensive” recommendation on the stock at the current price of – $3.71

Sky Network Television Ltd

Profits fall in FY16: Sky Network Television Ltd (ASX: SKT) reported only 0.1% year on year (yoy) growth in the revenue while the net profit after tax fell 14.4% on a yoy basis during FY16. Even though the stock generated returns over 8.14% this year to date (as of October 05, 2016), the group’s core business continues to be under pressure despite their efforts. We give an “Expensive” recommendation on the stock at the current price of – $4.62

 Superloop Ltd

Acquisition and Fund Raising efforts: Superloop Ltd (ASX: SLC) is set to release shares from voluntary escrow under its ApexN Pty Ltd Acquisition. SLC is acquiring 100% of BigAir’s shares on issue by way of a scheme of arrangement subject to various approvals. The acquisition (entailing 0.371 Superloop shares for each BigAir share held) would boost the opportunities for fibre business and allow SLC to accelerate the rollout of fibre across Australia. To partly fund the cash component of the consideration, SLC is raising around $65 million through institutional placement. However, SLC stock rose 52.45% in the last six months (as of October 05, 2016) placing them at higher levels. We believe that the stock is “Expensive” at the current price of – $2.99

Reverse Corp Limited

Fall in FY16 revenue and profit: Reverse Corp Limited (ASX: REF) reported a 21% fall in the revenue to $6,939,083 in FY 16 and 24% fall in the net profit after tax to $1,559,089. Moreover, REF continues to be impacted by the Australia Reverse Charge business (1800-Reverse) as the revenue decreased 20% on the previous year to $5,405,831 and Earnings before Interest Depreciation and Amortization (EBITDA) fell 24% to $2,876,965. The online contact lenses business, OzContacts.com.au reported an EBITDA loss of $3,215 which was an improvement on an equivalent loss of $41,860 last year. We give an “Expensive” recommendation on the stock at the current price of – $0.105

Megaport Ltd

Expanding penetration: Megaport Ltd (ASX: MP1) recently updated about its intended use of SDN based elastic fabric interconnection solution to power Digital Realty Inc.’s Service Exchange which would lead to the expansion of the MP1 fabric into additional locations to reach more customers and offer more connectivity options to existing MP1 customers. MP1 has raised 17.85M via private placement and has completed a Share Purchase Plan to raise a further $13.15 million. The amount raised is used for expansion throughout Europe, APAC, and North America as well as staffing and marketing costs and general working capital requirements. As a result, MP1 stock rose 46.8% in the last three months (as of October 05, 2016). However, in its first 11 months ending 30^th June, 2016, the group reported a revenue of $2,679,410 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%. The loss after direct network costs is of $1,539,765, which includes direct network costs for the Asia Pacific and North America business units. Moreover, the recent rally in the stock also placed them at higher levels, and accordingly, we give an “Expensive” recommendation on the stock at the current price of –  $2.87

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