Lifehealthcare Group Ltd 


LHC Details
 
Acquisition and operation costs impact first half profit:Lifehealthcare Group Ltd (ASX: LHC) reported a 12.3% rise in revenues to $54.4 million during the first half of 2016 while its net profit declined from $4.2 million to $3.1 million. The rise in operational costs as well as acquisition costs with higher interest and depreciation have hurt the group’s net profit during the period.  Moreover, the group’s debt has risen from $29.6 million to $35.2 million to fund Medical Vision Australia acquisition, which would certainly lead to higher finance costs. Meanwhile, management still expects fiscal year of 2016 revenues to be in the range of $113 - $116 million with consistent EBITDA margin.  The Group has secured key capital equipment tenders through the third quarter of 2016 while LHC is seeking to expand its presence and leverage cross selling opportunities by expansion into adjacent segments. On the other hand, the Government review into healthcare could impact the prices of its high margin products. This is a major risk to company’s revenue growth as sale of Prosthesis accounts to over 35% of sales revenue and also has high margins. Additionally, the company had disappointed the investors by cutting its dividend from 7.5 cents to 5 cents as company has no cash and negative operating cash flow. This suggests that even dividend payout would be done from borrowed fund. Given such negative factors, the group’s stock price plunged over 45.60% in last six months (as of May 27, 2016).
 

Fiscal year of 2016 revenue estimates (Source: Company reports)
 
On the other hand, the shares subsequently recovered and gained over 24.63% in last one month. But, we believe that the stock would continue to be under pressure in the coming months. The stock is also currently trading at a relatively higher P/E. Based on the foregoing, we give the stock an “Expensive” recommendation at the current market price of $1.71
 

LHC Daily Chart (Source: Thomson Reuters)
 
Lovisa Holdings Ltd


LOV Details

Continued growth in stores: Lovisa Holdings Ltd (ASX: LOV) reported continuing 3% growth for its Q3 FY16 like for like sales and forecasts the full year FY16 gross margin to be around 74% as mentioned in previous guidance. LOV also added 12 (net) stores in first half of 2016 to take the total count to 251 stores. The company had entered into the UK market by opening one store during the period while the exit of a competitor in Australia and New Zealand helped company to expand its base by opening 12 (net) new stores in this region. On the other hand, LOV stock plunged over 39.47% (as of May 27, 2016) in the last six months due to their lower than estimated guidance for fiscal year of 2016. Management has also reaffirmed its FY16 EBIT guidance in the range of $23.5 - $25.5 million for the group. But, the Group reported a 13.1% rise in sales to $82.6 million for the first half of FY16 while net profit was at $13.5 million. Lovisa Holdings declared interim dividend of 6.67 cents.
 

Lovisa Holdings store highlights (Source: Company reports)
 
However, going forward, the group intends to open 10 new stores in current market and would also close 10 poor performing stores. We believe that investors need to leverage the fall to enter the stock given its attractive valuations. Accordingly, we give a “Buy” recommendation on the stock at the current market price of  $2.06
 

LOV Daily Chart (Source: Thomson Reuters)
 
Altium Ltd


ALU Details
 
Growth strategy: Altium Ltd (ASX: ALU) has lately appointed Mr. Joe Bedewi as CFO. ALU partnered with Dassault Systemes Solidworks to introduce a new line of electronic CAD products reinforcing Altium’s bid for market leadership. The group also finished and integrated its acquired business of Octopart and Ciiva. Furthermore, it has completed the largest multi-year TASKING deal with a tier 1 automotive supplier. ALU is targeting growth via acquisitions and is also focusing on its organic growth.
 

1H FY16 Result Highlights (Source: Company reports)
 
Moreover, management said that they are on track to achieve its targeted revenues of $100 million in 2017. Meanwhile, Altium is also trading at attractive valuations with a relative cheaper P/E against its peers. The stock generated returns over 32.24% in the last six months and rallied over 5.06% in last five days alone (as of May 27, 2016). Based on the foregoing, we believe that ALU has more potential upside and give a “Hold” on the stock at the current price of  $6.38
 

ALU Daily Chart (Source: Thomson Reuters)

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