National Storage REIT 

Robust FY 2018 Performance: National Storage REIT (ASX: NSR) posted robust performance in FY 2018 and its operating profit witnessed the rise of 19% on the YoY basis to $76.4 million and the company’s profit after tax rose 41% YoY to $145.8 million. The company’s finance costs witnessed the rise in FY 2018 because of the increased borrowings related to the acquisitions.

   
NSR’s Profit & Loss (Source: Company Reports)

The company is having a strong position from the margins’ perspective. The company’s operating margin stood at 56.6% in FY 2018 which implies an improvement of 11.6% on the YoY basis. Also, the company witnessed substantial improvement in its net margin as in FY 2018 it was 104.4% which reflects the YoY increase of 16.4%. The company has a dividend yield of 5.48% which is moderately down from the industry average of 5.7%.

Crucial Numbers for FY 2019: Not so long ago, National Storage REIT had conducted the annual general meeting and the company also published the presentation of the same. The company stated that there are expectations that it would post underlying earnings between $62.5-$64.5 million in FY2019. In the same period, the company is expected to post underlying EPS between 9.6-9.9 cents per stapled security.

The management of the company had stated that the company has witnessed favourable momentum in FY 2018 in the four primary focus areas i.e. organic growth, acquisitions, developments as well as technology.

Stock Recommendation: On the daily chart of National Storage REIT, exponential moving average or EMA has been applied and default values were used for the purposes. As per the observation, there are expectations that the stock price might cross the EMA. However, the crossover has not yet occurred. It is expected that if the crossover occurs, the stock might witness favourable momentum moving forward.

Therefore, based on the above technical analysis and decent outlook underpinned by favorable organic growth, we maintain our “Hold” rating on the stock at the current market price of A$1.740 per share (up 1.458% on 22 January 2019). 
 

Paragon Care Limited

Optimistic on Acquisition of Total Communications: Paragon Care Limited (ASX: PGC) had earlier published the annual general meeting or AGM presentation. The presentation reflected that the company is very positive on the acquisition of Total Communications. It stated that the acquisition of Total Communications happens to be in line with the company’s strategy which revolves around on focusing towards avenues which give recurring streams of revenue and high-technology opportunities. 

In addition, the company had also posted decent performance with regards to the margins in FY 2018. The company’s gross margins stood at 40.2% in FY 2018 which implies the YoY rise of 0.9%. Also, the company’s net margin is also higher than the industry median. The company’s net margin stood at 8% while the industry median stood at 3.7%.

Working towards Organic Growth: Paragon Care Limited has been focusing on the activities which would support the company in generating the recurring revenues as well as which could help it in robust organic growth. As demonstrated by the company’s FY 2018 results presentation, there are expectations that the company might garner revenues amounting to around $260 million.

The company stated that there could be full contributions from the acquisitions which have been made in FY 2018.

PGC’s Revenues (Source: Company Reports)

However, in FY 2019, the company is expected to post EBITDA amounting to approximately $36 million.

Stock Recommendation: On the daily chart of Paragon Care Limited, exponential moving average or EMA has been applied and default values were considered for the purposes. After careful observation, it was noticed that soon the stock price might cross the EMA. However, this crossover has not yet taken place. If this crossover occurs, there are expectations that the stock might witness favourable momentum moving forward. Moreover, the company is expected to be supported by the acquisitions moving forward and, presently, the company has also witnessed decent performance when it comes to key margins. Meanwhile, the company has delivered the return of -15.71% in the span of previous three months and is trading at reasonable PE multiple of 10.93x with an annual dividend yield of 5.25%. On the backdrop of these factors, we maintain our “Speculative buy” recommendation on the stock at the current market price of A$0.595 per share (up 0.847% on 22 January 2019).   
 

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