Six hot picks under our purview

Nearmap Ltd

NEA Details
 
US business performance at par with the expectations: Nearmap Ltd (ASX: NEA) was able to achieve an annualized contract value (ACV) of $1 million in the US market and delivered a subscription revenue of $0.2 million during first half of 2016. NEA had also successfully delivered an Australian ACV of $30M million, at par with its expectations driven by solid penetration across industries. The group’s Australian subscription revenue improved by 21% to $13.6 million during first half of 2016 as compared to $11.2 million in the prior corresponding period (pcp). Gross profit improved by 22% to $12.3 million in Australia during the period against $10.1 million in the first half of 2015.
 


First half of 2016 performance (Source: Company Reports)
 
Meanwhile, the group built a solid capital position having cash balance of $14.4 million and has no debt.  Nearmap had developed a strong client base, and accordingly reported a 23% rise in its subscription revenues to $13.8 million. The group invested $4.5 million in sales and marketing for its US markets, which would drive the region’s business in the coming periods. NEA’s next generation HyperCamera 2 technology launch in the second half of fiscal year of 2016 would also drive its performance further. We remain bullish on NEA and accordingly reiterate our “BUY” recommendation at the current price of  $0.335
 
 
NEA Daily Chart (Source: Thomson Reuters)
 

IMF Bentham Ltd

IMF Dividend Details
 
Solid dividend yield: The shares of IMF Bentham Ltd (ASX: IMF) corrected more than 46.62% (as of February 22, 2016) in the last one year as the group lost many of the cases it funded during 2015, especially in the second half. But, investors need to note that IMF has a strong historical track record and accordingly settled and won 130 cases, out of a total of 175 cases since its listing (IMF withdrew over 35 cases and lost 10 cases out of these 175). Recently, the group is funding for a matter in the United States via its Bentham Capital subsidiary which has an initial claim value of $70 million. Another matter with an initial claim value of $47 million is reported to be funded in the US. Recently, the group is funding for a matter in the United States via its Bentham Capital subsidiary which has an initial claim value of $70 million. Management also reported that they are focusing to generate a future growth through their portfolio diversification strategy during the December quarter and implemented ten new funded matters. IMF’s European Joint Venture undertook three major funding matters which might lead to a rise in the portfolio claim value of over $200 million.
 


IMF Case Investment Portfolio as at 31 December 2015 (Source: Company Reports)
 
The group also reported that they are forecasting an average gross revenue of 15% of the portfolio value when the matters are finished. Meanwhile, the heavy correction also generated an outstanding dividend yield in the stock. We believe that IMF has the potential to recover from the current levels and accordingly give a “BUY” at the current price of  $1.22
 
 
IMF Daily Chart (Source: Thomson Reuters)
 

AUB Group Ltd

AUB Dividend Details
 
Optimizing portfolio by making strategic acquisitions as well as divestments: AUB Group Ltd (ASX: AUB) recently offloaded its 50% share in Strathearn Insurance Group to Arthur J. Gallagher & Co. to focus on its core operations, which would contribute to the after tax profit of around $5.9 million and over 9 cents per share to the reported NPAT for the year. The group intends to use the proceeds to repay its debt which would reduce its gearing ratio to over 17.5%. AUB is making efforts to optimize its portfolio and pursue growth opportunities and accordingly acquired Runacres and Associates Limited. Management reported that the collective result of the above two recent transactions would be positive, as well as enhance portfolio returns. Despite selling Strathearn Insurance Group stake, AUB reiterated the 5% rise in its adjusted NPAT for FY16 (excluding the realized cash profit). We believe that AUB stock is also trading at an attractive valuations with a reasonable P/E. Based on the foregoing, we give a “HOLD” recommendation on this dividend yield stock at the current price, ahead of its half year results to be released on February 25, 2016.
 
 
AUB Daily Chart (Source: Thomson Reuters)
 

Liquefied Natural Gas Ltd

LNG Details
 
Building contracts: Liquefied Natural Gas Ltd (ASX: LNG) recently reported that its subsidiary, Magnolia LNG made an agreement with Meridian LNG Holdings Corp for providing LNG of an annual capacity of 1.7 mtpa, while 0.3 mtpa additional capacity might be delivered based on Magnolia’s decision. The group made a 20 year agreement and has an option to extend for five more years. Moreover, Magnolia LNG even made a huge turnkey EPC contract with KBR lead KSJV, while the group has strategic alliance agreements with Siemens, Chart and EthosEnergy. The company has also reported for final authorization being issued by the US Department of Energy for Bear Head LNG to export LNG to Non-FTA countries.
 


Greater Magnolia LNG Project and greater Bear Head LNG Project (Source: Company Reports)
 
On the other hand, the shares of LNG had heavily corrected over 47.19% in the last three months (as of February 22, 2016) and over 73.71% in the last six months attributed to the ongoing decline of oil prices. But, we view this decline in the stock as an attractive opportunity to entry for investors seeking for long term value stocks, driven by the group’s long term agreements, strong cash position of $114 million (as of January 2016) and cost management initiatives. Based on the foregoing we give a “BUY” recommendation on the stock at the current price of  $0.595
 
 
LNG Daily Chart (Source: Thomson Reuters)
 

Syrah Resources Ltd

SYR Details
 
Strong Marketing efforts for Balama Project: Syrah Resources Ltd (ASX: SYR) stock surged 13.13% (as of February 22, 2016) in the last three months as the group’s strong marketing efforts for its Balama Project have been paying off. As a result, Syrah entered into several agreements indicating strong prospects for the Balama Project and consequently to the group. Accordingly, the group entered into a Statement of Sales Intent with Hiller Carbon for buying and reselling 25,000 tpa to 35,000 tpa of Balama recarburiser only in the United States, Canada and Mexico regions. SYR earlier entered into a Statement of Sales Intent with a major refractory producer for ten years to deliver up to 15,000 tonnes per annum (tpa). Syrah Resources even made a Product Sales Agreement with Morgan Hairong to offer 2,000 tpa of uncoated spherical graphite. The group entered into a three year marketing Agreement with Morgan Hairong to offer 5,000 tpa of uncoated spherical graphite as well as 2,000 tpa of coated spherical graphite. Meanwhile, Syrah Resources reiterated that its Balama Project progress is on track and even started the pre-stripping of the Balama West orebody. Based on the foregoing, we give a “HOLD” recommendation on the stock at the current price of  $4.01
 
 
SYR Daily Chart (Source: Thomson Reuters)
 

Arena REIT No 1

ARF Dividend Details
 
Solid performance: Arena REIT No 1 (ASX: ARF) reported an upgrade to FY16 distribution guidance to 10.9 cents a share indicating a 9% surge on previous year with half year distributable income per security of 5.52 cents, i.e., 11% on HY15. The company reported a 20% rise in net operating profit of $12.6m over HY15 while statutory profit of $41.4m surged 93%. This result was majorly driven by the strong property revaluations.
 


Earnings per security and Distributions per security (Source: Company reports)
 
With gearing reduced to 27.3% from 29.1%, the company has a solid business platform. We maintain our positive stance on ARF and rate the stock a “HOLD” at the current share price given the trading of the stock close to its 52-week high price.
 
 
ARF Daily Chart (Source: Thomson Reuters)

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