Four small and mid-cap stocks to pick

 
Fairfax Media Ltd


FXJ Details
 
Increasing reach via acquisitions to drive growth: Fairfax Media Ltd. (ASX: FXJ) surged 20.65% in the last one month (as at May 17, 2016) while its plans to merge the New Zealand assets with those of APN News & Media are expected to generate capital for share buybacks or reinvestment, as per the market. The company reported 2.8% rise in revenues to $958.1 million in first half of 2016. But, the net profit slumped by 2.2% to $79.8 million. On the other hand, the Group is investing in Domain Group and focusing on growing verticals - Life Media and Events with competitive strengths and skills. The Group has acquired strategic stake in Homepass in domain group and acquired Openair Cinemas in Life Media and Events.
 

Segment result overview (Source: Company Reports)
 
Australian Community Media had acquired 25% stake in local social network Nabo while Australian Metro Media sold its chullora and Tullamarine print sites. Advertising revenue increased after the acquisition of MMP and strong growth in Domain and Digital Ventures. The organic and non-organic business growth would drive the revenues for the company in the coming period. The stock also has a decent dividend yield. Based on the foregoing, we recommend a “Buy” at the current price of $0.945
 

FXJ Daily Chart (Source: Thomson Reuters)
 
Ardent Leisure Group


AAD Details
 
Focusing on key business:Ardent Leisure Group (ASX: AAD) has recently undertaken various strategic initiatives to expand its key leisure and entertainment business in Australia and the US. Accordingly, it plans to sell its $110 million-odd d’Albora Marinas, the largest marina group in Australia and add 11 new centers to Main Event Family Entertainment Centres in the USA taking count to 38 locations across 12 states. The group intends to transform its traditional AMF branded bowling center to multi attraction family entertainment center along with new facility in Darwin. AAD is also developing its unique attraction at Dreamworld to enhance its range of mass market entertainment experiences. Moreover, Carlyle Group, is planning to buy stake in the Group. Meanwhile, the group reported a revenue of $333.8 million for the first half of FY16, up 16.8% compared with the prior corresponding period as a result of new sites, strategic marketing and improved customer experiences. The group has opened two new main event centres and plans to add another five in the second half of FY16. Various initiatives taken by the Group are expected to bring continuous improvement in business performance. Accordingly, we recommend a “Buy” at the current market price of $2.205
 

AAD Daily Chart (Source: Thomson Reuters)
 
Crown resorts Ltd


CWN Details
 
Melco update and investments to drive future growth: Crown Resort Ltd (ASX: CWN) surged 2.64% in the last one month (as at May 17, 2016) with the sell down of its shareholding in Melco Crown Entertainment (MPEL) to 27.4% from 34.3%. CWN reported a 5.7% dip in EBITDA for first half of FY16 to $424.4 million while net profit declined by 34.8% to $210.3 million. During H1FY16, the group acquired 20% ownership interest in the international restaurant and hotel company, Nobu, for $136.4 million and 50% ownership interest in part of the property and operations at Ellerston for $59.1 million.
 

Debt Structure (Source: Company Reports)
 
The current debt position (December 2015) net of cash is at $2,951.8 million with BBB rating (stable) from various rating agencies. But, there is a massive upswing in debt on the back of a decline in normalized earnings. This is a result of the company investing heavily in upcoming projects. With the sell down in shareholding in Melco, the debt might be managed partly. On a long term perspective, the group’s investment is likely to pay off as the group has a portfolio of world-class assets. We recommend a “Buy” on the stock at the current market price of $11.94
 

CWN Daily Chart (Source: Thomson Reuters)
 
Wellard Ltd


WLD Details
 
Expanding fleet size: Wellard Ltd (ASX: WLD) released its operating update stating the issuance of import permits for 250,000 cattle by Indonesian Government in the May-August trimester. This is a positive news complementing the WLD’s shipping schedule which would avoid any delay in loading cattle for Indonesian clients. The company recently added MV Ocean Shearer to its expanding fleet of livestock vessel increasing capacity by 50%. The vessel is en-route to South America. Furthermore, Wellard and WGH Holdings Pty Ltd have signed a joint venture agreement with Fulida group Holding Co Ltd and Zhejiang Aurora Agriculture Co ltd which would help them to strengthen their presence in China and foray in investing in the construction of the facilities. We believe the stock can be considered as a “Speculative Buy” at the current price of $0.785
 

WLD Daily Chart (Source: Thomson Reuters)

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