Stocks’ Details

G8 Education Ltd (ASX: GEM)

Improvement expected in long-term – G8 Education Limited (ASX: GEM) has recently announced its H1 2018 results with revenue coming in 7.6% higher at $396.4 million against $368.3 million in the previous corresponding period. Underlying EBIT was posted at $48.1 million by the company, a drop of 21.2% from H1 2017. Decline in EBIT was the result of increase in wage cost of $7.2 million, given the regulatory amendments made in the staff ratios. There has been occupancy improvement from the January base. For the half year, EBITDA to cash conversion has been at 99%. Net cash flow from Operating activities was reported at $30 million, an increase of 23% YOY. We believe that policy changes that have impacted the bottom-line numbers are not a recurring factor and the company might be able to adjust these going ahead.

 
Company footprints by Geography (Source: Company Reports)

Recent slump in the share can be attributed to the drop in G8’s profit. After gap down towards the end of last year, the stock has been in the downtrend ever since. The fall came on above average volume post result, but the share price rebounded the very next trading session. The near-term price pullback might occur since the stock has fallen below the lower band. Additionally, the stock is holding on to its long-term crucial support level of $1.90 and rebounding from the same level. We maintain “HOLD” rating on the stock at $2.13 (up 5.5% on August 28, 2018), believing that once the recent headwinds settle down, the stock may regain the momentum. Primarily, the management’s indications on encouraging occupancy growth in July and August with new Child Care Subsidy scheme may turn the scenario a bit.
 

NetComm Wireless Ltd (ASX: NTC)

Slumping on bleak FY19 outlook while long-term scenario is to be seen – NetComm Wireless Limited (ASX: NTC) dropped a whopping 40% post its full year financial performance results. Despite, posting the good numbers, the stock tumbled on the bourses. Investors seemed to exit their position after management cautioned that FY19 would be the year of consolidation. For the full year 2018, group revenue came in at $181.7 million, an increase of 69% YOY. Operating cash flow increased to $23.7 million and Balance Sheet remained debt free.

 
Growth in EBITDA (Source: Company Presentation)

Followed by the year of strategic investment, the company has posted record EBITDA in 2018. The company stated that for FY19, the revenue is expected to be somewhere in the range of 15% to 20% due to slower than expected implementation of the nbn FTC project. We believe that the skepticism around the growth outlook of the company may subside with some key drivers taking shape, which may help stock price recover a bit. However, this is subject to many factors.

Year to date stock price has dropped -32.08% and was in a consolidation phase before slumping on the back of cautious tone of the management for the year ahead. At the current levels, we believe that the stock has bottomed out with relative strength index indicating a possible reversal  from the oversold region. We maintain our ‘HOLD’ rating on the stock at the current market price of $0.81, and wait for any significant movement as the group indicated to have an improved scenario post mid of 2019 and into 2020.
 

Monash IVF Group Ltd (ASX: MVF)

One-time cost impact on results - Monash IVF Group Limited (ASX: MVF) reported dismal FY18 result with revenue coming in at $150.6 million compared to $155.2 million in the previous corresponding period. However, the drop-in revenue was primarily witnessed due to departure of a Victorian Facility Specialist. If the factor is taken out, the company has witnessed strong international growth. There has also been an increase in the income generated from non-invasive prenatal testing. For the H1FY19, the company estimates that NPAT would take a hit of approximately 15% on pcp, since FY18 included one quarter of ARS activity from the specialist who has left the organization. We believe that the cost incurred related to the departure of the Fertility specialist, legal proceedings and recruitment drive are kind of one-time costs.


Revenue Growth (Source: Company Reports)

After forming a double top pattern in 2016, the stock has declined making lower highs and lower lows. However, the price has respected the strong support level of $1.059 repeatedly. Despite dismal results, the stock did not fall below the support level. We maintain a ‘HOLD’ rating on the stock at the current market price of $1.20 expecting some recovery going forward.

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.