Stock’s Details
 

Smartgroup Corporation Ltd

Acquired Fleet West Pty Ltd and provided a strong trading update: Smartgroup Corporation Ltd (ASX: SIQ) stock rose 6.4% on December 14, 2017 after the company acquired 100% of the shares in Fleet West Pty Ltd and outlined an expectation of strong profit growth in CY 2017. Fleet West has been acquired for a consideration, net of cash, of $8.0 million in cash and $1.0m in shares (with 50% of the shares escrowed until the end of March 2019 and the remainder until the end of March 2020). The acquisition is expected to close in January 2018. Moreover, the acquisition of Fleet West is expected to contribute c.$2.2m EBITDA in CY 2018. The implied acquisition is at c.4.1x projected CY 2018 EBITDA and CY 2018 EPS accretion of c.2%. Additionally, SIQ in CY 2017 expects to post NPATA of $64.0m, which is a growth of 45% on prior year. This strong growth is due to the achievement of synergies earlier than expected from the AccessPay, Aspire and RACV Salary Solutions acquisitions completed earlier this year. Furthermore, SIQ stock has risen 10.99% in three months as on December 13, 2017. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $10.75
 

Service Offerings (Source: Company Reports)
 

NextDc Ltd

Wind-up Action: NextDc Ltd (ASX: NXT) intends to convene an Extraordinary General Meeting of security holders in the Asia Pacific Data Centre Trust to pursue the Wind-up Action of the Trust and distribute the net cash proceeds to all members. NXT has a holding of 29.2% interest in the Asia Pacific Data Centre Group (APDC). The meeting of the Trust is expected to convene early in the New Year. This is due to the fact that NXT has concerns over the governance track record of the 360 Capital Group, which now controls APDC, with limited true independent controls. Moreover, the Proposed Capital Distribution is not in the best interests of all securityholders as this would increase APDC’s debt to imprudent levels and will significantly elevate its risk profile, which will reduce both the quantum and value of future distributions and restrict APDC’s ability to fund growth initiatives. Meanwhile, NXT stock has risen 20.64% in three months as on December 13, 2017 at the back of continued performance. Based on the foregoing, we give a “Hold” recommendation on the stock at the current price of $5.65
 

Amaysim Australia Ltd

Update on Business: Amaysim Australia Ltd (ASX: AYS) has completed the diversification strategy and launched all scoped verticals (mobile, devices, broadband and energy) under the amaysim brand. The company has completed the integration of Click. All verticals’ year to date performance is strong and in line with the company’s expectation. Moreover, AYS focus in FY 18 is executing on its cross-sell strategy. AYS was expected to tap into subscriber demand for affordable energy and devices by launching amaysim energy in the first half of the FY18 and the amaysim online device store later in the financial year. AYS stock has edged up in last one month; and based on the potential and strong financial performance, we give a “Buy” recommendation on the stock at the current price of $2.01
 

Cross Sell Strategy for the Amaysim Group (Source: Company Reports)
 

Carsales.Com Ltd

Acquiring remaining 50.1% of SKEncar.com: In November, Carsales.Com Ltd (ASX: CAR) and South Korea’s SK Holdings Co., Ltd signed a binding Memorandum of Understanding for CAR to purchase the remaining 50.1% of South Korea’s SK ENCARSALES.COM Ltd after getting requisite approvals. The acquisition is a significant milestone in CAR’s long-term strategy to be the global leader in online auto classifieds and CAR will have 100% control and ownership of South Korea’s number one online auto classifieds business. The CAR stock has risen 35.06% in six months as on December 13, 2017, and is trading at a high level. While the prospects are good, we believe that the stock is “Expensive” at the current price of $15.21
 

Domain Holdings Australia Ltd

Separation Scheme Implemented:Real estate services business, Domain Holdings Australia Ltd (ASX: DHG) stock has risen 3.25% in five days as on December 13, 2017. DHG has been listed recently on 15 November 2017. The scheme of arrangement for the separation of Domain from Fairfax Media Ltd is implemented and the stock started trading on ASX on a normal settlement basis on 23 November 2017. Domain is putting efforts on having a mobile platform while its full year digital revenue was up 18.8%. While the potential exists, the stock still looks “Expensive” at the current price of $3.52, and we would wait for any dip to evaluate an entry position.
 

Integrated Research Ltd

Underlying business conditions are better than last year:Integrated Research Ltd.’s (ASX: IRI) transition to a higher recurring licence model is continuing and expected to yield better returns in coming years. IRI expects that Avaya will emerge from Chapter 11 shortly, which will remove uncertainty from the market and provide a stimulus for Prognosis sales. Moreover, the growing market share of Microsoft along with the increasing importance of service providers are all positive for the company, and the company is well-placed to take advantage of this trend. On the other hand, IRI has not provided market guidance on revenue or profit projections. Further, IRI is not planning any major acquisitions. The company is focusing on organic growth or small acquisitions of complementary products, if appropriate. Additionally, the underlying business conditions are better than last year with slightly higher GDP growth rates forecast for both the U.S. and Europe. IRI is also continuing its significant investment in its product lines to improve its competitive position and to expand into new markets. Meanwhile, IRI stock has risen 10.94% in three months as on December 13, 2017. We give a “Hold” recommendation on the stock at the current price of $3.65
 

FY17 Financial Performance (Source: Company Reports)
 

Wisetech Global Ltd

Global Expansion Programme: Wisetech Global Ltd.’s (ASX: WTC) business continued to experience strong growth during 2017 with revenues rising up to 50% to $153.8 million and net profit also up to $31.9 million as compared to $2.2 million in 2016. Return on equity increased from 1.6% to 15.6% in one year. In 2017, WTC invested its 33% of the revenue in product development and innovation, and announced nine acquisitions across the globe. The custom attrition rate is also less than 1 per cent and top 10 customers globally represent 27% of revenues. In 2018, they expect to deliver revenue growth of 30%-37% and EBITDA growth of 32%-39%. The group’s major acquisition of Global Warehouse Management Solutions provider, Microlistics, will provide benefits when coupled with the flagship CargoWise technology for providing integrated solutions to logistic providers. Wisetech has spread across more than 7000 countries and has spent $50.4 million on Research and Development which is one of the highest R&D spends of any ASX200 company. The company is also planning to buy adjacencies to its core logistics software platform such as land transport and cold storage providers. More acquisitions are planned in the coming years along with investments in machine learning, natural language processing and in robotics to drive the firm’s highest growth. Wisetech shares have more than doubled this year and the stock was also admitted to the S&P ASX200 index. Given the run-up, the stock looks quite “Expensive” at the current price of $12.70

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