Six Stock Picks for January 2018 – ANZ, WMI, PGC, DTZ, WOW & SLK

Australia and New Zealand Banking Group Ltd

ANZ Details

Strategizing well: Australia and New Zealand Banking Group Ltd (ASX: ANZ) reported that New Zealand’s Overseas Investment Office has declined HNA Group’s application to acquire UDC Finance. ANZ management said that if the sale is not proceeding, the group would pursue strategic options regarding the future of UDC, which continues to be a profitable and strong business with great staff and customers, and comprises a growing loan portfolio across a range of industries. On the other side, UDC transaction would lead to over 10 basis points of APRA CET1 capital. Meanwhile, ANZ continues to focus on customers given their strategy to be the best bank for people who want to start, run and grow a business. They launched ANZ Business Ready in partnership with Honcho, which is s a simple, efficient and cost-effective solution that enables them to get their ABN, get a logo, register their business name, set up a website and a business email address, and open a business bank account. The group is also aiming to be a leaner organization, with 4% fewer people than a year ago, and 12% less against their peak levels three years ago. ANZ is also simplifying their portfolio and accordingly sold 16 businesses in the last two years which includes Pensions and Investments business to IOOF and Australian Life Insurance business to Zurich Insurance. The bank is undertaking a $1.5 billion share buyback early in 2018. ANZ stock currently has a decent dividend yield and is trading at a reasonable P/E. We recommend a “Buy” on the stock at the current price of $28.81


ANZ Daily Chart (Source: Thomson Reuters)
 

WAM Microcap Ltd

WMI Details
Outperforming benchmark index: WAM Microcap Ltd (ASX: WMI) reported a decent performance for November, with WMI Investment Portfolio delivering a 7.2% return in one month (as of 30 November 2017) as compared to S&P/ASX Small Ordinaries Accumulation Index returns of 3.9%. For three months, WMI Investment Portfolio delivered returns of over 14.5% (as of 30 November 2017) against the benchmark of 11.6%. Since inception, WMI Investment Portfolio generated 23.1% against the S&P/ASX Small Ordinaries Accumulation Index returns of 15%. The group is also building a diversified base. The group aims to deliver a stream of fully franked dividends with capital growth over the medium-to-long term and provides exposure to undervalued micro-cap growth companies.
 

Portfolio composition (Source: Company reports)
 
WAM stock generated over 23.7% returns since its launch in June 2017, and we believe the bullish momentum in the stock will continue in near term. Accordingly, we rate the stock a “Speculative Buy” at the current price of $1.425


WMI Daily Chart (Source: Thomson Reuters)
 

Paragon Care Ltd

PGC Details

Positive outlook: Paragon Care Ltd (ASX: PGC) made two new acquisitions, Insight Surgical and Medtech Solutions with both expected to be EPS accretive. Insight Surgical delivered $1 million of EBITDA in FY17 on revenues of $4 million, and the group bought this firm for $5 million plus an earn out for FY18 while Medtech Solutions was acquired for $2.4 million, and would be moderately EPS accretive for Paragon in FY18. The group also expanded their presence in South Australia via a series of organic growth initiatives. The new warehouse at Wingfield offers the infrastructure to facilitate a better distribution footprint in the region. The company expects the benefit of this development to start from January 2018. Further, PGC expects FY18 revenue to be in the range of $125 million to $135 million and FY18 EBITDA to be in the range of $18m – $19m. The full year NPAT is forecasted to be in the range of $10.5m – $11.5m. The group made a collaboration agreement with Toshiba Medical for MIDAS Software. Trading at a good dividend yield, we give a “Speculative Buy” recommendation on the stock at the current price of $0.81


PGC Daily Chart (Source: Thomson Reuters)
 

Dotz Nano Ltd

DTZ Details

Filed for US patent: Dotz Nano Ltd (ASX: DTZ) filed for a provisional patent application with the U.S. Patent and Trademark Office. Provisional Patent application relates to using GQDs (Graphene Quantum Dots) as anti-counterfeiting/brand protection marker in conjunction with blockchain technology for encrypted authentication and validation of GQD markers. This was filed under preparatory phase for collaborations with blockchain companies and commercialization of anti-counterfeiting/brand protection with companies and potential end users. The patent application is part of the group’s intention to expand their Intellectual Property program. We recommend a “Speculative Buy” on the stock at the current price of $0.175


DTZ Daily Chart (Source: Thomson Reuters)
 

Woolworths Group Ltd

WOW Details

Ongoing focus on customers: Woolworths Group Ltd (ASX: WOW) recently reported that the ACCC has opposed their proposed acquisition of the retail fuel business by BP. On the other hand, the group made solid progress across their customer, team and supplier experience. The group’s major priority is to build a Customer and Store-led Culture. The group had over 1.4 million customers as of FY17, offering a direct feedback to them via their Voice of Customer survey. They continue to focus on Evolve, their Drinks Business and built a solid position in drinks in Australia, with the number one and number two retail brands in Dan Murphy’s and BWS. They rolled out Pick up to 1,240 BWS stores, integrated Langton’s into Dan Murphy’s, and grew the My Dan Murphy’s loyalty program to over 2.4 million members. In New Zealand Food, the group reported that FY18 would be a year of investment in service, fresh and online to meet customers’ demand. We believe that the group’s growth efforts would improve their performance in the coming months. We maintain a “Buy” on this dividend yield stock at the current price of $27.50


WOW Daily Chart (Source: Thomson Reuters)
 

Sealink Travel Group Ltd

SLK Details
Expanding portfolio: Sealink Travel Group Ltd (ASX: SLK) reported that contribution from Captain Cook Cruises Western Australia was below their expectations. On the other hand, the group reported a new service to Rottnest Island which is a major opportunity for their WA operations and is on track with their strategic plan for this business. They have already integrated the former Transit Systems businesses in SE Queensland (SEQ) and Gladstone, while recently bought Captain Cook Cruises in Western Australia. The group got work for the five Capricornian vessels from Gladstone and started new routes in Sydney (Manly to Barangaroo) and Perth (Rottnest Island).
 

EBIT by location (Source: Company reports)
 
The group sees positive market conditions in Australia while expanding opportunities for their current businesses including maximizing utilization for their fleet of 74 vessels. SLK continued to work on their fleet renewal and replacement program, while added three more vessels during the year. We recommend a “Speculative Buy” on this dividend yield stock at the current price of $4.10


SLK Daily Chart (Source: Thomson Reuters)

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