Six Fully Franked themes to buy or hold this financial year

Retail Food Group Limited


RFG Details

Acquisitions and International Expansion: Retail Food Group Limited (ASX: RFG) recently confirmed new gold coast global head office and also announced for the resignation of its joint secretary, Mrs Tracy Bartley. The company has been expanding via acquiring brands, and in FY16, the company’s revenue has increased due to first full year contribution from the brands Gloria Jeans Coffee (purchased for $163 million), coffee wholesaler Coffee Di Bella ($30m), as well as New Zealand-based mobile coffee business Café2U acquired in FY15. For 1H 16, EBITDA contributions were made from International (16.8%) and Commercial (37.8%) operations. FY16 guidance has been maintained with NPAT growth of 20%.
 

1H16 highlights (Source: Company Reports)
 
Earlier, the coffee wholesale and franchise network opportunities was said to lead to business expectation of about $16 million over three years to 2016-17. This would add about 1000 outlets across 40 countries (500-plus international outlets) to the previous base of about 1500 outlets concentrated in Australia. RFG has delivered a return on equity averaging 23% over the last five years. RFG generated over 22.08% in the last six months (as of June 23, 2016). We give a “Hold” recommendation on the stock at the current price of $5.33
 

RFG Daily Chart (Source: Thomson Reuters)
 
Shriro Holdings Ltd


SHM Details

Strategic initiatives to generate growth: Shriro Holdings Ltd (ASX: SHM) has signed an agreement with Heston Blumenthal to create a worldwide barbeque brand, ‘Everdure by Heston Blumenthal’. This is a strategic decision by Shriro to launch celebrity-related products after the success of product, the Neil Perry Kitchen by Omega cooking appliances which are exclusively sold through Harvey Norman stores. The company has planned to launch the first Everdure by Heston Blumenthal barbeque product at the Spoga outdoor trade fair in Cologne, Germany, in September and will then be available in the Australian market.
 

Better results against prospectus forecasts (Source: Company Reports)
 
The group also delivered decent performance for fiscal year of 2015 with 24% increase in net profit. SHM is even expanding G-Factory stores with the release of G-Shock premium watches. The company expects stronger growth in 2017-2018 with new product launches and accordingly we believe the stock would recover in the coming months. Moreover, the stock is trading at a reasonable P/E. We give a “Speculative Buy” recommendation on the stock at the current price of $0.82
 

SHM Daily Chart (Source: Thomson Reuters)
 
Bellamy's Australia Ltd


BAL Details

China potential despite regulatory challenges: Bellamy's Australia Ltd (ASX: BAL) stock corrected over 25.50% in the last six months (as of June 23, 2016) as investors were concerned over the group’s impact on the recent Chinese Government regulations on infant formula currently. On the other hand, recently the group’s competitor, a2 Milk Company enhanced their guidance indicating the lower than estimated impact on china’s regulations on the infant formula provider’s growth. Accordingly, BAL stock recovered a little in the last five days. Moreover, for FY16, the Group’s revenue is expected to be in the range of A$240 million to A$260 million while margins are expected to be broadly in line with 1H16. The company is expanding in SE Asia, apart from China & Australia.
 

BAL prospects in China (Source: Company Reports)
 
In the first half of 2016, BAL’s revenue increased by 83.3% while profit increased by 325.3% as compared to corresponding period 2015. The company has also boosted its senior leadership team with the addition of Andrew Cohen as Chief Operations and Strategy Officer and Catherine Henry as Executive Director. We maintain our “Speculative Buy” recommendation on the stock at the current price of $10.28
 

BAL Daily Chart (Source: Thomson Reuters)
 
Mantra Group Ltd


MTR Details

Boosting capital position: Mantra Group Ltd (ASX: MTR) has resorted to Share Purchase Plan (SPP) at $3.84, in which the new shares were to be allotted on June 15, 2016. The company has reported 26% increase in EBITDA in the first half 2016 as compared to corresponding period in 2015 while Mantra Group reconfirmed its FY2016 guidance of EBITDAI, NPAT and NPATA in the range of $88.5 million – 90.5 million, $41.5 million – 43 million and $44.2 million - 45.7 million, respectively.
 

Mantra Group performance (Source: Company Reports)
 
Meanwhile, Mantra is acquiring ALM Management Services Hawaii, that operates the Ala Moana Hotel, Honolulu as well as is acquiring associated real estate for a purchase price of US$52.5 million (about A$71 million) to expand its presence in key offshore regions. The acquisition is expected to close by July 2016. We believe the stock would recover in the coming months and accordingly give a “Buy” recommendation at the current price of $3.34
  
                                                                   
MTR Daily Chart (Source: Thomson Reuters)
 
Sealink Travel Group Ltd


SLK Details

Expanding penetration: Sealink Travel Group Ltd (ASX: SLK) finished Captain Cook Cruises, Western Australia business acquisition via present debt facilities to expand business and fleet. SLK has expanded its fleet to 72 vessels and carries over 7 million passengers per year. Sealink Travel has spent over $2 million in the first half of 2016. China and Hong Kong both depict strong tourist numbers when it comes to inbound tourism statistics for Australia. SLK can benefit from an increase in domestic tourism, favorable fuel costs and larger fleet for better utilization. SLK stock delivered a year to date returns of 22.922% (as of June 23, 2016). Despite the rally, we believe there is more potential and accordingly we put a “Hold” at the current price of $4.17
 

SEA Daily Chart (Source: Thomson Reuters)
 
Corporate Travel Management Ltd


CTD Details

Multiple initiatives to maintain growth: Corporate Travel Management Ltd (ASX: CTD) stock rallied over 14.812% in the last six months (as of June 23, 2016) driven by the group’s acquisition and online launches. The company had acquired Montrose Travel, Los Angeles in January 2016 and announced for the acquisition of Travizon, Boston in July 2016 on expansion efforts.
 

FY16-FY17 strategic initiatives (Source: Company Reports)
 
CTD launched online booking website via flybuys, as a part of its client facing innovation efforts. The group even reconfirmed its guidance of underlying FY16 EBITDA at top end of range at $68 million. Despite the strong rally, we believe the group’s efforts to withstand its growth track would continue to drive the stock in the coming months. Accordingly, we give a “Hold” on the stock at the current price of $13.99
 

CTD Daily Chart (Source: Thomson Reuters)

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