THREE GROWTH STOCKS TO CONSIDER FOR BUYING

M2 Group Ltd

                    MTU Dividend Details
 
Merger with Vocus: M2 Group Ltd’s (ASX: MTU) merger with Vocus Communications, wherein MTU shareholders would get 1.625 Vocus shares for each M2 share, is on track. The merged entity would be strategically placed to leverage the NBN in Australia and the Ultra Fast Broadband in New Zealand. Meanwhile, the combined revenue before synergies is estimated to be about $1.8 billion and EBITDA would be $370 million in fiscal year of 2016 while the market capitalization would be more than $3 billion. The group estimates to generate cost synergies of $40 million per annum which might be fully realized by the end of FY18. Moreover, the merger would also enhance the balance sheet with leverage of 1.8x net debt to FY16 EBITDA (estimates). Recently, the Australian Competition and Consumer Commission reported that it would not oppose Vocus Communication’s proposed acquisition of M2 Group and said that this merger is amid two complementary businesses.
 

Enhanced revenue diversification (Source: Company reports)
 
Stock Performance: M2 Group delivered a decent performance during fiscal year of 2015, with the revenues improving by 9% to $1.12 billion, well ahead of its estimates. Solid organic growth coupled with one month contribution from the acquisition of CallPlus during June 2015 drove the performance. The group’s net profit after tax also rose by 10% to $73.7 million, driven by ongoing focus on internal business improvements as well as the realization of synergies from earlier acquisitions. Meanwhile, MTU stock delivered strong returns in this year, generating 29.88% (as of November 06, 2015) increase in this year to date and 12.75% increase in the last four weeks. The recent merger with Vocus would further support the stock in the coming periods. Based on the foregoing, we give a BUY recommendation on the stock at the current price of  $10.52
 
 

 

Fairfax Media Ltd

          FXJ Dividend Details
 
Returned to growth track after eight years: Fairfax Media Limited (ASX: FXJ) reported its top line growth of 0.3% yoy for the first time in eight years driven by solid 45% increase in domain group revenues. Accordingly, Fairfax is investing in its growth business like Domain, Life Media & Events, and Stan to offset the pressure from print business and introduced over $39 million of further growth-related operating expenses. The group’s digital advertising revenue enhanced by 36.4% yoy in FY15. FXJ improved its agent subscribers and listings by 20% and 16%, respectively. The group’s real estate sites visits also enhanced by 30%. FXJ’s growth track would be ongoing even during fiscal year of 2016 and the group already generated over 2% to 3% increase in the first five weeks of FY16 as compared to last year, boosted by Domain.com.au revenue increase.
 

Fairfax media performance highlights (Source: Company reports)
 
Stock Performance: The shares of Fairfax rose by 3.49% in the last three months (as at November 06, 2015) but dropped about 4.81% in the last five days around its AGM. The recent drop was related to the trading update that revealed weak print advertising while domain group performed extremely well (revenue surging 68% year to date) with Metro media overall up 10% and the radio division exhibited good results with Macquarie radio network up 56% on a continuing business basis. We believe the stock still has the potential to rise in the coming months given its improving performance after several years even when we see some bit of deterioration in the publishing businesses. Basically, the earnings from Domain and Radio are expected to help outweigh the slips in the publishing assets. Accordingly, we place a speculative BUY recommendation on the stock at the current price of  $0.89
 
 
FXJ Daily Chart (Source: Thomson Reuters)
 

Ramsay Health Care Ltd

     RHC Dividend Details
 
Expanding international Portfolio: Ramsay Health Care Limited (ASX: RHC) is positioning itself to be among the major private hospital operators across the world while maintaining a steady growth. Accordingly, Ramsay is expanding its presence in China, Indonesia, Malaysia and France apart from Australia. Ramsay Sime Darby Healthcare in conjunction with Guangzhou Overseas Chinese Hospital is seeking to set up several high quality hospitals in China. Earlier, the group made an agreement with Jinxin, a Chinese based health care company, to jointly operate five hospitals in the city of Chengdu, China during this year. Meanwhile, RHC Australian and Asian business recorded a revenue of $4,055.5 million in fiscal year of 2015, which is an increase by over 8.2% as compared to 2014 fiscal year driven by solid volume growth on the back of growing ageing population as well as rise in reported diseases, which drove the admissions to the group’s hospitals. Ramsay’s UK business segment revenues rose by 8% yoy to £413.2 million during fiscal year of 2015 on the back of growth in NHS admissions leading to over 75% of total UK segments admissions. With regards to the France business, the revenues delivered outstanding performance during the period, as Ramsay Santé and Generale de Sante generated more than estimated performance wherein Generale de Sante delivered nine months contribution to financial year ending on June 30, 2015. The group also made a strategic alliance with the International Consortium for Health outcomes Measurement (ICHOM), and therefore became the first multinational hospital group to partner with the US-based organization focusing on patient’s needs.
 

Financial performance improvement over the years (Source: Company Reports)
 
Stock Performance: Ramsay approved over $197 million for building new brownfields capacity along with existing projects, while it forecasts to generate over 33 projects leading to a total of 1041 beds (net 754) as well as add 41 theatres during fiscal years 2015 and 2016. We believe that the group’s exportable operational model coupled with rising ageing population and government initiatives would further drive its overall business growth. The group is also well positioned to leverage the growing demand for health care in Australia wherein Health insurance participation is quiet strong with more than 47%. The shares of Ramsay healthcare delivered over 8.03% (as of November 06, 2015), in the last four weeks and we maintain our positive stance on the stock and accordingly give a BUY recommendation on the stock at the current price of $64.06
 
 
RHC Daily Chart (Source: Thomson Reuters)

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