4 Stocks to Buy Before Christmas - CGL, CLH, APL, NEC

Stocks’ Details

The Citadel Group Limited

Increase in Product Revenue by 157%:The Citadel Group Limited (ASX: CGL) is a software and technology company which specialises to secure enterprise information management across health, national security, defence and corporate enterprises. In the recently held Annual General Meeting, the top Management of the company addressed its shareholders and stated that Citadel-IX gained momentum with an increasing product revenue by 157% in FY19. The company also reported a strong balance sheet with a reduction in debt to $12 million from $17.8 million and a cash balance of $14 million. During the year ended 30 June 2019, the revenue of the company stood at $99.2 million, down by 6.9% from $106.5 million in FY18. This was mainly due to customer-controlled project extensions.


Financial Performance (Source: Company Reports)

What to Expect: In the coming years, the company would continue its focus on recurring revenue, and this might support long terms earnings growth. It is targeting a lower double-digit growth in organic revenue. It will also continue to build a recurring revenue model that places less dependence on lumpy project-based opportunities and diversify its revenue streams to reduce reliance on single clients/contracts. CGL also expects growth opportunities across the Knowledge, Health and Technology segments.

Valuation Methodology: PE Based Multiple Approach

P/E Based Valuation (Source: Thomson Reuters), *NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of CGL gave a return of 2.01% in the past three months and a return of 14.65% in the last one month. The stock is currently inclined towards its 52-week low of $2.940, proffering a decent opportunity for accumulation. In the time span of 5 years from FY15 to FY19, the company witnessed a CAGR of 18.12% in gross profit. During the year, gross margin of the company stood at 44.6% and ROE (return on equity) was 9.5%. Thus, considering the past returns, trading levels, and decent outlook, - we have valued the stock using a relative valuation, i.e., P/E based valuation, and arrived at a target price of lower double-digit growth (in percentage terms).Hence, we recommend a “Buy” rating on the stock at the current market price of $4.180 per share, up by 2.703% on December 05, 2019.

Collection House Limited

Decent Rise in Revenue: Collection House Limited (ASX: CLH) is primarily engaged in the provision of debt collection services and purchase of consumer debt. The company announced that Doug McAlpine will take on the role of CEO following the resignation of Anthony Rivas. In the recently held Annual General Meeting of the company, the top management stated that CLH has met the profit target with an 8% increase in Net Profit After Tax to $22 million, excluding the profit recognised under PEP. During the year ended 30 June 2019, revenue of the company stood at $161.1 million, up by 12% on FY18. This was mainly driven by the 5 million. It also provided the guidance for second transaction with Balbec Capital LP, Purchase Debt Ledger (or PDL) growth and a positive revenue recognition change under AASB 9. 


Financial Performance (Source: Company Reports)

What to Expect: The company remains confident of the outlook for Cash Collections, PDL purchases and profit growth and gave a guidance for cash collection and expects to be in between $145 million to $155 million. It also provided guidance for statutory EPS and expects it to be in the range of 23 cps to 24 cps, equating the growth of up to 23%.

Valuation Methodology: EV/EBITDA Multiple Approach
 

EV/EBITDA Valuation Multiple (Source: Thomson Reuters), *NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of CLH gave a negative return of 12.30% in the last one month and is currently trading close to 52-weeks low of $1.070. In the time span of 5 years from FY15 to FY19, the company witnessed a CAGR of 6.34% in revenue and CAGR of 5.39% in gross profit. Net margin of the company has slightly improved over the past year and stood at 19.1% as compared to 18.2% in FY18. During the year, ROE was 14.1% as compared to 13.2% in FY18. Hence, we recommend a “Buy” rating on the stock at the current market price of $1.085, up by 1.402% on December 05, 2019.

Antipodes Global Investment Company Ltd

Strong Balance Sheet with Increasing Total Assets: Antipodes Global Investment Company Ltd (ASX: APL) is an investment company and provides an exposure to a high conviction portfolio of global investments, predominantly comprised of long and short positions in international listed securities. As on 4 December 2019, Post-tax NTA (Net Tangible Asset) stood at $1.131 per share. In the recently held AGM of the company, the top management of the company stated that annualisedNTA performance for the period from inception to 30 September 2019 was 9.2%. It also declared a final dividend of 2.5 cents per share (franked as to 50%)which was paid on 14 October 2019.During the year, the company reported net assets of $630.1 million, up from $459.02 million.


Company Performance (Source: Company Reports)

What to Expect: The company aims to achieve absolute returns in excess of the benchmark over the investment cycle. It believes that the biggest risk in the market is overvalued growth stocks and a slowing domestic US economy but is confident that its investment approach will generate attractive long-term returns for the company while minimising risk.

Stock Recommendation: As per ASX, the stock of APL gave a return of 5.32% in the past 6 months and a return of 7.03% in the last 3 months. During the year, gross margin of the company stood at 53% and RoE of the company was 1.4%. As mentioned above, the company’s net assets have increased, which could attract the attention of market participants moving forward.Considering the respectable returns and decent outlook, we recommend a “Buy” rating on the stock at the current market price of $0.995, up by 0.505% on December 05, 2019.

Nine Entertainment Co. Holdings Limited

Decent Rise in EBITDA: Nine Entertainment Co. Holdings Limited (ASX: NEC) is a media and entertainment company, engaged in broadcasting and program production across free to air television and metropolitan radio networks, publishing across digital platforms and newspapers, real estate media and subscription video on demand. The company announced that it will release its H1 FY20 results on 26 February 2020. In the recently held AGM of the company, the top management stated that group EBITDA went up by 10% to $424m. This was achieved despite the headwinds of particularly difficult advertising and housing markets and was driven by strong performances from Metro Media, 9Now, Stan and reduced Corporate Costs. This resulted in the EPS to rise by 16% to 11.6 cents per share from 10 cents per share.


Financial Performance (Source: Company Reports)

Valuation Methodology: PE Based Multiple Approach

P/E Valuation Multiple (Source: Thomson Reuters), *NTM: Next Twelve Months

Stock Recommendation: NEC is expecting to report low single-digit growth in Pro Forma Group EBITDA, pre the impact of AASB16. The Group continues to selectively invest in growth initiatives, supported by ongoing cost discipline. 9Now also performed decently, taking a 49% share of a market, which grew by 38% across the year. As per ASX, the stock gave a return of 29.63% on YTD basis but corrected 4.37% in the last one month. In the time span of 4 years from FY16 to FY19, the company witnessed a CAGR of 53.18% in gross profit. During the year, gross margin and EBITDA margin of the company improved on the previous year and stood at 43.8% and 19.1%, up from 28.9% and 18.8%, respectively. Considering the decent returns, improving margins, we have valued the stock using a relative valuation method, i.e., P/E multiple, and arrived at a target price of lower double-digit return (in percentage terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $1.765, up by 0.857% on December 5, 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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.