Tag Archives: Hot Stock

If We HAD To Pick ONE STOCK This Would Be It…

We are often asked… 

“If you could invest in just ONE company right now, what would it be?” Or “If you were to buy ONE stock for your kids/ grandkids what would it be?”

So, here it is! Drum roll please……..

Firstwave (ASX:FCT)

In a nutshell, FCT’s platform enables clients to move their email & data/security from an on-premise environment into a cloud environment.

Firstwave has recently had their email cloud security platform technology globally validated, first by CISCO, then NTT Data UK

The market opportunity is enormous. If they execute well, the revenue can move from ~$10m to $40m in a relatively short space of time. 

For comparison Nasdaq listed ZScaler (US$6.0 Billion Market Cap), just filed US$63m Revenue. 

The current market cap for FCT at $0.24 is a mere $70m. 

Capital injection with funds used to support and grow.  

FCT recently raised A$6.5m via a placement and A$1.2m via an oversubscribed SPP at 28 cents per share. 

Additionally, it renegotiated a customer deal to bring forward ~12 months of revenue, which collectively should generate a cash inflow of nearly ~A$13m in Q4FY19. 

The funds raised will be used to continue developing the business case and more specifically to monetise the ‘Expand’ phase of FCT’s international expansion. 

FCT has traditionally run a very tight cash balance so we are pleased to see the company better capitalised in the short term and in a position to focus on execution rather than capital. 

ZScaler – The best comparison.

One of the best Nasdaq floats in 2018, ZScaler (US$6.0 Billion Market Cap) is a comparable company to FCT. 

More advanced in its delivery, and revenue growth is impressive. Nonetheless, the market is paying a huge price for this growth. 

If FCT rapidly moves through $30m in ARR, the business has significant fixed cost leverage to those earnings. It will also be a US$ growth business, with high recurring revenue that is extremely sticky, which trades on a high multiple here as well.

FCT – Revenue

The company is targeting to grow revenue from FY18 ~$8m to $50m in FY19-21. The company will need to invest $15m in the delivery process. 

They forecast an EBITDA Margin of ~20% ($10m after amortising the $15m overhead). 

Given the background of the company, the management is particularly cautious with guiding the market. However, NTT Data is forecast at $8m-$10m (ARR annualised recurring revenue), and CISCO has a number of Proof of Value trials underway (final process before contract). 

If these CISCO trials convert, it is not unreasonable for them to be much larger than FCT’s entire Telstra revenue piece. It would be disappointing if the CISCO relationship did not deliver $10-20m in the next 12 months. 

The market will have to sit-up and take notice of a company that grows its ARR from around $6m to A$25-30m in the space of 12-18 months. 

Telstra is the gorilla in the room in terms of Australian clients, and FCT has that validation. However, Telstra is dwarfed by the CISCO/NTT client book.

In our view, delivering this revenue growth is the key to a share price re-rating.

 

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Equity Story Pty Ltd (ABN 94 127 714 998) is registered with the Australian Securities and Investment Commission under Australian Financial Services Licence (AFSL) 343937. General Advice Warning: This research does not constitute a personal recommendation or consider the investment objectives, financial situation or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.FCT is a current open recommendation to Equity Story clients.

Hot Stock of the Week: Praemium (PPS)

We’re back with another one, and this week it’s Praemium (PPS)!

The ASX 200 hasn’t been the most exciting ride with global markets on a decline seeing the ASX follow suit. In times like these our Hot Stocks haven’t been performing to the best of their potential, however they have seen stronger moves than most and it’s best to tread carefully and adjust trading strategies to better cater to stockpicking in a hard market.

With Praemium (PPS), it’s our pick this week for a few strong reasons. On the fundamental aspect, recent growth both domestically and overseas has been strong, and we expect another positive update in April. We are picking this story as well as it has had a significant pullback on the back of recent market volatility. The Praemium brand is becoming ever more popular with development and evolution of the SMSF and other functionalities.

On the technical front, after going on a recent tear and reaching highs of 85.5c PPS has had a solid pullback breaking the 20 day moving average on a weekly chart. Right now it is holding right on the 40 day moving average @ 59c. If good news is on the horizon there is plenty of blue sky between here and the recent highs!

In case you didn’t know, Praemium is an Australian/UK financial technology company specialising in creating platforms that are used by financial advisers for reporting and investments. Recent report on the half year was phenomenal with revenue up 25% to $20.5M and profit up 87% to $3.3M.

 

Hot Stock of the Week: Evolution Mining (EVN)!

This week it goes to Evolution Mining (EVN)!

One of Equity Story’s 3YR Growth stories, Evolution Mining (EVN) looked fantastic as a candidate for our Hot Stock this week and after rigorous analysis, we’ve crowned it this week’s pick.

On the fundamental front, we’ve seen EVN consistently put out growth figures with one of the lowest AISCs in the industry to boast and a record low for them at $785/oz for their recent half year. We continue to see EVN put out solid numbers and really like their Cowal operation being able to deliver 130koz just last half year.

Further, Trump’s recent political maneuvers in Trade and a weakening Aussie dollar, we see as boosts to EVN short to medium term and with technicals suggesting a break to the upside, we think gold is gaining traction and will take EVN on a ride along with it.

In a difficult market like we are experiencing now, Gold should ordinarily do well. On that general note, fingers crossed for continued momentum!

 

This Week’s Hot Stock Is Valmec (VMX)

The Golden Hot Star stock of the week is awarded to Valmec Limited (VMX). The half year results recently reported were strong on revenue and earnings growth. In particular,  Revenue was up 66% on HY17 to $49.7 million, EBITDA increased by $2.3 million or 209% on HY17 to $3.4 million, and Net Profit before Tax increased by $2.1 million.

There was a significant ramp-up in construction activity across all sectors, and they experienced industry leading safety performance currently over 1.6 million hours LTI free, along with a stronger balance sheet supported by a Jan 2018 equity raise.

Plus, add to the fact that we get a chart that looks like it’s ready to have an aggressive run in a sector that is also popular with investors.

Why we like it:

On the fundamentals it’s quite simply as the results clearly show. VMX is poised for strong growth on the back of a growing order book and improving margins in a market that’s on the up.

The company recently raised $5.1 million and is well-funded for growth.

And on the technicals…VMX has not broken its short term (20x day) moving average since August 2017. While not a super-aggressive trend, it continues to elegantly swing its way to higher highs.

As the momentum traders would say “why wouldn’t you buy that?

Why we picked A2 Milk Company (A2M) this week

Not only does the A2M chart just look absolutely phenomenal, the story does too!

The Company just announced recently that they will be expanding their brand across the North East region of the US from this month. The Company has also told shareholders that sales in California, the South East region, and select natural retail chains are achieving sustainable levels, and is the perfect reason to be making this move to New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, New Hampshire, Massachusetts, Vermont, and Maine.

The total number of stores should be taken from ~3,600 stores to potential ~5,000 stores from January and the “Love Milk Again” advertising campaign will be commencing. Although this definitely will have an effect on 2H18’s marketing spend for A2M, we think this should push them further in sales.

So to recap, extremely bullish chart plus strong sentiment behind solid fundamentals. That’s the recipe for a Hot Stock.

This week our Hot Stock is Xero (XRO), a cloud-based online accounting software for SMEs and advisors. We think EPS growth is positive and thus believe that along with this week’s attractive look on the technicals, XRO will be the one stock that will gather some momentum.

The charts show that the stock is slowly recovering after having hit recent lows of $25.825. We think it should break over $30 with some strength, hopefully this week, and continue to go higher.

 

This week’s hot stock is none other than one of our favourites in the sector, Macquarie Group (MQG). A superstar stock that has only just joined the $100 club, hopefully which will act as a strong level of support. With Trump’s tax cuts to happen, we view this as positive sentiment gathering around the stock and sector, and could potentially even be better longer-term as well!

Macquarie has been quite the stock in 2017 having bounced from its lows in 2016, the reinvention and refocus on their core business has really driven shareholder confidence and overall share price performance.

We are seriously impressed with Macqaurie as a whole and it is a stock that we are more than happy to recommend short-term (knowing any pullback would be more likely to be attributed to day-to-day price action vs. a fundamental flaw in the business).

Get it while it’s hot!

Our Hot Stock of the Week is none other than Praemim (PPS)! One of Equity Story’s 3YR Growth stories that is looking particularly bullish this week.

Record inflows FUA recently reached $4.53 Billion and $2.49 Billion for the international business, Blackrock recently becoming a major shareholder, a strong chart. 2018 Could be the year for PPS!