The Citadel Group

Strong Growth Outlook: The Citadel Group Limited (ASX: CGL) had an eventful FY18 as the IT security and data management company recorded healthy numbers and the upbeat forecast. The company has a strong portfolio of Government clients with the new ones in Victoria, Queensland, and New South Wales and supports more than 24,000 new Citadel-IX users. The company won 10 new long-term contracts for Citadel- IX. Higher revenue was driven by the client wins across the portfolio of solutions along with the rollout of multi-year Australian Federal Government Agency Contract. Throughout the FY2018, the company expanded its customer base with notable mentions such as RAAF in New South Wales, Melbourne City Council, Royal Adelaide Hospital, Department of Defense among others. On financial front, the company has consistently posted higher operating margins over 5 years with the latest coming in at 23.9% compared to the industry average of 19.2%. Apart from effective cost management, it has also generated higher returns for the shareholders consistently with ROE marked at 20.5% for FY18 against the industry return of 12.0%.


Revenue Growth (Source: Company Reports)

Meanwhile, the stock has reflected the positive developments happening around, generating a YTD return of 25.44%. CGL shares have been in a secular uptrend and current developments clubbed with the outlook of the company are expected to drive the growth further. We, therefore, recommend a ‘Buy’ in the stock at the current market price of $7.850.
 

iCAR Asia

Core Business remains strong: iCAR Asia Limited (ASX: ICQ) posted strong 1H FY2018 results driven by the growth in all the markets. The company posted a profit of $5,008,342, up 12% from $4,482,592 in FY17. The major revenue contributing segment i.e. User Car Sales remained strong posting a growth of 35% in FY18 compared to previous corresponding period. Besides this, the second quarter of the half year saw record quarterly cash collections at A$3.21Mn, an increase of 29% over the previous corresponding period. This is the company’s highest ever quarterly cash receipts.As at June 30, the company had cash at bank of $15.2 Mn.The company has a positive outlook for the third quarter expecting record revenue growth in the quarter and 50% more than the previous comparable period. Main drivers of the growth would be retimed new car revenues in Q3 and progress in the Used Car business.
 

Revenue Contribution by Geography (Source: Company Reports)

Meanwhile, the stock has generated YTD return of 12.50% and has been trading in a tight consolidation range from quite some time now. We expect that Narrowing EBITDA losses and increasing audience across the Geography would ramp up the growth further, going forward. Moreover, the efforts made by the company to cut down on operating expenses and manage cost effectively would reflect in the numbers and in stock price. We, therefore, recommend ‘Speculative Buy’ in the stock at the current market price of $0.225.
 

Auscann Group Holdings

Cannabinoid Meds to drive growth: Auscann Group Holdings Limited (ASX: AC8) has been trading in green since the company was listed on OTCQX market under the scrip code ACNNF. The company posted lower losses in FY18 at $7,569,001, down more than 45% compared to $14,207,117 Mn posted in FY2017. Losses were recorded primarily due to a share-based payment of $2.7 Mn for advisor share options issued during the period. Increase in the R&D expense was due to product launch due in Australia in FY19. On the other hand, the company has entered into various strategic partnerships in Australia, Canada, and Chile and is progressing towards becoming a fully-integrated Cannabinoid pharmaceutical company. The company has been progressing on all fronts including new agreements, R&D breakthroughs, and regulatory approval. The Cannabinoid medicines could be an improvement over the opioid-based medicines prescribed to the patients suffering from Chronic neuropathic pain. A key challenge for the company would be to convince the doctors and medical fraternity to switch to cannabinoid. The company has enough liquidity with current ratio at 23.17x compared to the Industry average of 2.47x.


Integrated Business Model (Source: Company Reports)

The stock has rewarded the shareholders generating year to date return of 27.95%. Going ahead, the recent capital raise of AUD$35 Mn keeps the company well-funded to take ahead its R&D program and cover operational cost. Also, listing on the OTCQX would diversify the investor platform of the company and give a stronger foothold in North America where the company has numerous strategic agreements. We, therefore, recommend ‘Hold’ on the stock at the current market price of $1.060 (up 2.9% on September 14, 2018).
 
 

  
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