Four stocks having Positive Return on Equity and good to keep in the new year

Ramsay Health Care Ltd

RHC Details
Core NPAT and EPS growth guidance reaffirmed for FY17: Ramsay Health Care Ltd (ASX: RHC) recently commented that its strategically diversified quality portfolio of hospitals will keep on delivering admissions growth in line with its long-term trend. Further, FY17 first quarter results are said to be in line with the expectations. Core NPAT and Core EPS growth of 10-12% for FY17 has also been reaffirmed. This had come at the back of rising market concerns about slowing hospital admissions growth in Australia. Primarily, a slowdown in Australian private hospital volume growth of 3% against the 10-year average of 4.6% has raised concerns. 


Delivering on Growth Strategy (Source: Company Reports)
 
On the other hand, population growth and ageing are two factors that are still expected to drive some growth. Some boost to RHC’s performance may also come from emerging technology and the rising rate of chronic disease. RHC also plans to open a major new rehabilitation and mental health facility on the Gold Coast in early 2017 and had about $200 million of future developments approved during FY16. We maintain our ‘Hold’ recommendation at the current price of $ 67.72

 
RHC Daily Chart (Source: Thomson Reuters) 

Seek Ltd

SEK Details
Rise in dividends: Seek Ltd (ASX: SEK) has attained record results in FY16 while the global economy witnessed subdued environment. The sales revenue growth of 11% and EBITDA growth of 5% helped the group increase the total dividends by 11% over the previous year. SEK has reinvested in product and technology capabilities within its existing businesses. The group aims to follow a four-phase growth strategy focusing on the Australia and New Zealand employment marketplace, international online employment marketplaces and education businesses, talent sourcing/placements, and human capital management. SEK’s 12 year CAGRs for revenue and EBITDA have been 30% and 31%, respectively. SEK has reaffirmed its FY17 NPAT guidance of $215 million to $220 million (excluding early-stage losses of about $25 million and $16 million one-off costs related to cessation of SEEK Learning that happened at the back of regulatory reforms). 

International Growth Drivers (Source: Company Reports)
 
The group also intends to launch a new education business to provide an online trip advisor like platform for education courses. SEK is also positive about growth for Zhaopin at the back of a strong quarterly result entailing revenue growth of 21% and EBITDA growth of 14% in local currency terms, and continues transaction discussions with many parties having expertise in China. Seek International is also supported by many growth drivers. We give a ‘Hold’ recommendation at the current price of $ 14.77

 
SEKDaily Chart (Source: Thomson Reuters) 

WAM Capital Ltd

WAM Details
Strong FY16 total shareholder return: WAM Capital Ltd(ASX: WAM) stock has risen 11.2% this year to date (as at December 19, 2016) while the group reported Net tangible asset figure of 193.47 cents after tax, as at November 30, 2016. The stock provides exposure to an actively managed diversified portfolio of undervalued growth stocks. In last one year, WAM investment portfolio outperformed the S&P/ASX All Ordinaries Accumulation Index by 7% while there has been an underperformance by 2.8% in last one month. The group’s FY16 total shareholder return was up 24.5% and investment portfolio performance was up 21.6% while pre-tax profit was up 85.7%. We maintain our ‘Hold’ recommendation at the current price of $ $ 2.38

 
WAM Daily Chart (Source: Thomson Reuters) 

Greencross Ltd

GXL Details
Launch of Click-and-Collect online capability in early 2017: Greencross Ltd (ASX: GXL) in financial year (FY) 2016 reported that the group continued to deliver on its strategy and had strong cash conversion (EBITDA cash conversion of 108%) and inventory efficiency. The group expanded its footprint with the addition of 21 stores, 23 clinics (including 14 in-store clinics) and 14 grooming salons. In-store clinics have been said to perform ahead of plan. GXL has also rolled out the group loyalty plan at national level. The online model is reported to work well and there has been an 83% rise in online revenue. Otherwise, GXL reported for 14% surge in group revenue to $733.7 million. The group is on track to have 32 in-store clinics by the end of FY17. Further, the trading update for FY17 (as at 23 October 2016) indicated for group Like for like (LFL) sales growth of 3.9%, retail LFL sales growth of 3.7%, and Vet GP LFL sales growth of 4.2%. FY17 underlying EBITDA and NPAT growth are expected to be at similar levels to that of FY16. Roll-out targets are also said to be consistent with FY16.
 

Average Customer Spend (Source: Company Reports)
 
Benefits are expected from higher retail spend per customer and visit frequency. The group will launch its Click-and-Collect online capability in early 2017. However, standalone vet M&A seems to be subdued in FY17 till date. Further, risks relating to competition, asset pricing and some bit of market saturation also need to be given heed. Overall, we see value given the group’s focus on earnings quality and performance in the industry. We give a ‘Hold’ recommendation at the current price of $ 6.78

 
GXLDaily Chart (Source: Thomson Reuters)

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