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Power Stocks to Bet on - NetComm Wireless + Xero Ltd + Yowie Group Ltd

Oct 01, 2015 | Team Kalkine
Power Stocks to Bet on - NetComm Wireless + Xero Ltd + Yowie Group Ltd

Netcomm Wireless



M2M and Rural Broadband focus to underpin growth:
The recent launch of the NetComm Wireless 4G M2M Router (NTC-140-02) has given an upside to NetComm Wireless Limited (ASX: NTC). The router is set to enhance speed, improve reliability and security in relation to data-specific applications. Along with such efforts, NTC has been able to deliver revenue growth of 15.1% yoy to $74.33 million for the fiscal year of 2015, driven by Ericsson/NBN Rural Broadband project. EBITDA rose 39.8% yoy to $7.30 million during the period which contains $1.8 million business reinvestment. Subsequently, the group’s Net profit after tax surged 142% yoy to $2.46 million while Earnings per share increased 141.8% yoy to 1.91 cps. NTC continues to focus on M2M and Rural Broadband to drive its growth in the coming years. The group entered into agreement with Singtel to market its M2M products and services, which is estimated to add extra op 20 M2M telecommunications carriers. NTC was nominated to develop ICT component of Hitachi’s smart energy project in May 2015. Arrow Electronics and Tele2 also entered into agreements with NTC. Moreover, as per Ovum’s Global Comparison research, NBN’s fixed wireless product is far better against its international peers across a range of metrics. NBN product is also technically better than its peers, and are available at affordable prices. Meanwhile, NTC is maintaining a conservative balance sheet and decreased borrowings to $3.35 million. Nonetheless, cash declined by 21.1% yoy to $3.40 million as it repaid borrowings.

 
NBN Competitive edge (Source: Company Reports)

Stock Outlook: The shares of NTC posted excellent returns this year, generating 185.4% returns in this year to date. The group’s superior FY15 performance and rapidly growing M2M and Rural Broadband partnerships contributed to the growth. Having a solid competitive edge, and with its investments estimated to generate value in the coming periods, we remain bullish on the stock at the current price of $1.600.


NTC Daily Chart (Source: Thomson Reuters)

XERO


Strong subscriber’s growth:
XERO FPO NZ (ASX:XRO) reported that its total subscribers base in Australia and New Zealand reached 400,000 subscribers, which is an increase of 44% against 277,000 subscribers as of September 2014. Accordingly, Xero has over 540,000 customers across the world. Xero’s Touch app downloads also witnessed outstanding increase of 82% on a year over year basis to 470,000. The group maintained its solid growth, delivering revenue growth of 77% to $123.9 million in the 2015 fiscal year as compared $70.1 million in FY14. The Paying customers rose 67% yoy to 475,000 during the period. The annualizedcommitted monthly revenue (ACMR)soared 71% year on year (yoy) to $159.3 million in FY15. But, XRO’s net loss after taxincreased by 96%yoy to $69.5 million on the back of rise in product development and sales and marketing initiatives. Meanwhile, the group launched over 1,000 product updatesin its core online accounting solution over the last two years wherein around 600 updates were done during 2015. Xero maintained a $268.9 million of cash flow and used $88.4 million of cash and cash equivalents in operating and investing activities compared to $48.4 million during FY14. XRO also raised over $147.2 million during March from Accel Partners and Matrix Capital Management to fund its growth activities. The company also announced that the number of subscribers has exceeded 100,000 in the United Kingdom.


Building long-term Margin (Source: Company Reports)

Stock Outlook:
Xero continues to focus onUS, wherein the U.S customers delivered an outstanding growth of 300% during the second half of the year. Forbes awarded Xero as the Most Innovative Growth Company for the second consecutive year, while IDC recognized Xero as the fastest growing company in the payroll accounting area which represents 74.7% year over year revenue growth in 2014. XRO is fastest growing financial applications vendor based on IDC, as it witnessed 80.3% year over year revenue growth in 2014. Xero is also among selected SaaS companies across the world (less than 7% as per company reports), which can scale its user base to more than 10,000 subscribers. Meanwhile, the group forecasts its subscription revenue to be more than NZ$200 million for 2016 fiscal year (according to June 2015 FX rates). Earlier, Xero estimated that its recurring revenue model which is implemented in 2016, would generate year over year growth of 71% annualized committed monthly revenue of $159.3 million in 2016 fiscal year. Despite delivering an outstanding year to date returns of 185.4%, we remain bullish on the stock given its growth potential at the current price of $13.70.
 

XRO Daily Chart (Source: Thomson Reuters)

Yowie Group



Delivered Spectacular returns to investors:
Yowie Group Ltd (ASX: YOW) delivered an outstanding performance during the fiscal year of 2015, with revenues surging over 2,200% on a year over year basis. The group is rolling out Yowie confectionery all over the United States through over 4300 Walmart stores from last month, as a part of its strategy to boost the consumer penetration of its chocolate product. In fact, Yowie is targeting the huge United States market opportunity of greater than 320 million people and accordingly Yowie estimates a volume in the range of 700 to 800 million units and projects greater than $2 billion value. Apart from the US, Yowie had already built >30% volume market share through Ferrero’s Kinder Surprise and secured over 36.2% value share in the Australian’s children's confectionery market.


Shares and Options (Source: Company Reports)

Meanwhile, the group finished raising of over $10 million equity capital for funding its US rollout and targets to generate growth via national U.S. distribution and sales. The shares of Yowie generated an outstanding performance this year, delivering 120.2% year to date returns. We believe the bullish momentum to continue in the stocks given its focus on the US markets and accordingly give a “BUY” recommendation at the current price of $1.17.


YOW Daily Chart (Source: Thomson Reuters)
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