Four Small Cap Growth Companies






MMA Offshore Limited

• Falling Oil prices impact: MMA Offshore Ltd (ASX: MRM) shares have plunged around 60% during this year to date (as of Sep 10) on the back of falling oil prices. On the other hand, the group delivered a decent fiscal 2015 performance, posting a revenue increase of 34% yoy to $796.7 million (including full year of Jaya operations). Oil and gas companies have been cutting capital expenditures to offset the falling oil prices, and MMA is on track to meet its $15 million cost reduction forecast. The group reported an EBIT and NPAT increase of 8.3% and 2.7% to $86.9 million and $55.3 million (pre-impairment) respectively. Earnings per Share improved by 20.2% to 15 cents before impairment). However, MRM reported Net Loss after Tax $51.3 million post $120.7 million non-cash impairment charge. The group’s second half performance declined even more, due to plunging oil price, consequently impacting the Rates and utilization across all regions. But, MMA is making efforts to offset the pressure by focusing on its operational efficiency and also scaling up the business to address the growth in the industry in future. The group delivered outstanding Dividends during the period to 5.5 cents per share, which is a 56.0% increase against pcp, and has a strong dividend yield of 10.6%. We view the recent correction as an attractive buying opportunity for investors, and accordingly give a “BUY” recommendation at the current price of $0.51

 
       
 
       Financial Performance (Source: Company Reports)

Cash Converters International Ltd

• Addressing challenges to get back on the growth track: Cash Converters International Ltd (ASX: CCV) have been under pressure over the past few months, falling around 56% this year to date (Sep 10). The group was charged with a class action claim on behalf of borrowers resident in Queensland who took out personal loans from the Company’s subsidiaries during the period from 30 July 2009 to 30 June 2013. On other hand, the group has delivered a revenue increase of 13.0% to $374.9 million in the fiscal year of 2015, driven by the rise in personal loan interest of $14.6 million, establishment fees of $7.8 million and corporate store revenue of $18.3 million. Meanwhile, the group is also undergoing management changes with Chairman Mr Reginald Webb retiring by 2016 financial year while Mr Stuart Grimshaw would be the acting Non-Executive chairman. Mr Mark Reid is replacing Mr Ian Day as CEO, Australia. Cash Converters has a solid online business and built a wide product range to scale up the business in future. The group recently appointed CACE Partners to design its strategy to address the rapidly changing market. Cash Converters has a decent dividend yield of 4.6%. We view the recent correction in the stock offers attractive opportunity to investors and subsequently recommend a “BUY” at the current price of $0.49

 
NearMap Ltd        

• US market underpin future growth: Nearmap Ltd (ASX: NEA) delivered a 32% yoy growth in revenue to $23.6 million during the FY2015, but the group’s profit before tax plunged 82% yoy to $0.6 million, impacted by the US setup costs. The group’s US segment contributed to the revenues for the first time during the year, and reiterated its revenue forecast in the range of $30 million to $50 million in the US by December 2017. The shares of NEA have corrected over 30% year to date, party attributed to its earnings pressure due to heavy US setup costs and tough market conditions. However, we believe that the group’s efforts in the US would be paid off in the coming years, and accordingly drive the stock performance. We give a “BUY” recommendation to the stock at the current levels of $0.45

 
Capitol Health

• MRI market focus to drive growth: Capitol Health Ltd (ASX: CAJ) reported a decent fiscal 2015 performance with revenues rising by 23% yoy to $111.2 million, driven by improving market share, organic growth, synergies from SR and IOP acquisitions . The underlying net profit before tax soared 59% yoy to $16.2 million, driven by the better operational efficiencies. Consequently the group’s NPBT margin surged by 325 basis points to 14.5% in FY15, from 11.3% in FY14, indicating the group’s operating leverage.

       

• The group improved its dividend per shares by 39% to 1.25 cents in FY15, from 0.9 cents in FY14.  On the other, CAJ stock have been under pressure this year falling around 42.5% in the last six months, against the broader S&P/ ASX 200 decline of 12.5%. But, we believe that investors need to leverage this correction to enter the stock as CAJ growth would continue to be driven by the ageing population and sub-specialty radiology focus in the coming periods. Government initiatives to favor players investing towards MRI shift is estimated to offer some support to the stock. Accordingly, we suggest to “BUY” CAJ at the current stock price of $0.60

 
       
                            Improving performance over the years (Source: Company Reports)       
 

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