• HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT
Tamim Asset Management
  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT

Stock Insights

FY18 Reporting Season - Small Cap Portfolio Preview

1/8/2018

0 Comments

 
The Small Cap team run through their portfolio in anticipation of the results to come over reporting season.

With a look at 12 small cap stocks due to report their FY 2018 results, the team provides their thoughts on what to expect for each investment through the next 2 months.

Pioneer Credit (PNC.ASX)
Debt collector Pioneer reported a very strong first half result (cash collections increased 47% for H118), and upgraded its FY18 guidance to more than $17m (FY17 profit was $11m). With economic conditions for the business stable, we expect PNC to comfortably meet its guidance and report a positive outlook, continuing the strong momentum experienced over the last 3 years. 

There has been no material news flow released by PNC since its half year results, accordingly, we expect the full year result to refocus investors on the compelling fundamentals that PNC offers. 
​
Key points of interest that we will be looking for in the full year results include:
  1. Continued growth in cash collections
  2. Progress in PNC’s new market of collecting Lenders Mortgage Insurance residuals - it was previously reported that initial results indicated performance to be slightly ahead of expectations.  
  3. Progress in PNC’s new personal loan division, Credit Connect, where PNC has said it is targeting a $30m loan book by December 2018.   
Joyce Corporation (JYC.ASX)
FY18 has seen Joyce continue to invest and grow its business units - we expect to see organic revenue growth for FY18 of at least 15%, driven by the continued roll out of KWB Kitchen and Bedshed stores, and a significant increase in turnover in the Lloyds Online Auction business (to more than $100m). In an environment where genuine organic growth is hard to come by, this revenue growth will be a pleasing result. 

With significant investments made across all business units over the last two years, establishing a number of market leading positions, we expect Joyce to provide a very positive outlook for FY19 when it reports. 

Significant value remains unlocked within its subsidiary investments, in particular Lloyds, so it was pleasing to see the recent strengthening of the JYC executive team with the appointment of a chief operating officer to provide additional management support and assistance with potential merger and acquisition activity. 
Blackwall (BWF.ASX)
Blackwall will report a strong full year result – underwritten by its first half result where recognition of performance fees saw it deliver a record NPAT of $6.8m. Of most interest when BWF reports will be the progress of its flexible workspace business WOTSO, which continues to grow quickly in a fast-growing market.  In March, WOTSO’s annualized turnover was at $8.4m, and we expect to see further good growth here on the back of new locations in Chermside (Westfield), Bondi Junction and Sippy Downs. We also expect an update on WOTSO’s South East Asian roll-out, with new locations set for Kuala Lumpur and Johor in Malaysia through a joint venture with its Malaysian partner property developer UEM Group (owned by the Malaysian Government).

BWF continues to have approximately half its market capitalisation supported by its on-balance sheet investments, with the implied total value of its profitable WOTSO, funds management and property management businesses currently sitting at around $30m – accordingly significant value remains unlocked here, particularly in relation to WOTSO.  In previous updates, Management have talked about how WOTSO is structured to enable a spin off, a trade sale, investment from or merger with a strategic partner, any of which would likely realise value for BWF – so an update on this would be positive. 
Zenitas Healthcare (ZNT.ASX)
Community healthcare provider Zenitas has an opportunity when it reports to demonstrate to the market it is delivering on its growth objectives. In H1, Zenitas reported strong organic growth (7.5%) and noted that its acquisitions were performing well.  ZNT is expecting up to 10% organic growth for FY18 and delivering this and a result in line with guidance will provide confidence that Management is executing on its strategy.

There have been significant operational developments since Zenitas last reported. We will be looking for an update on this activity including:
  • The development of ZNT’s mobile health strategy across several modalities including physiotherapy, podiatry and GP services.
  • Growth of its homecare business, which has seen a significant increase in government funding and private funding, as the shift in focus from hospital care to home care gains traction.  
  • Progress of organic growth initiatives Management have put in place over the past year, particularly from cross-referrals and group marketing strategies. 
  • Progress in relation to its recent acquisitions.
Konekt (KKT.ASX) 
At the start of FY18 Konekt completed a transformational acquisition with the purchase of Mission Providence, to diversify its service offerings. This business has performed well. However, KKT’s core business softened with weaker workers compensation markets in NSW and South Australia impacting performance. In April, KKT advised it expected FY18 EBITDA of between $8.5m to $9.5m (previously expected $10m, FY17: $5.5m). At the time of the update, Konekt said it expected its FY19 results to be strongly up on the FY18 results, reflecting the first 12 month contribution of the acquisition plus targeted occupancy synergies of $2.5m - $3.0m (which were on track to be achieved as a run rate by the end of December 2018).

Confirmation of this FY19 growth, and signs that the workers compensation market has stabilised will help to restore some confidence in KKT’s outlook, as will continued growth from other service offerings including mental health, pre-employment and consulting services and Mission Providence (now rebranded as Konekt Employment).
Traffic Technologies (TTI.ASX)
The underlying portfolio acquired a holding in TTI, Australia’s largest traffic software and solutions company. Directors and associated parties contributed ~$1.2m of the $6m raised, through the April rights issue, the proceeds of which were used to significantly improve TTI’s balance sheet. In June TTI pre-announced its FY18 results.

TTI has historically been known as a supplier of road signs and lights, with lumpy revenues tied to infrastructure spending. In recent times, TTI has been successful in commercialising its “Smart City” platform - wireless intelligent remote sensors installed in street lights or on the side of roads that can gather information on a wide range of inputs including the environment, traffic and people flow, energy and power data, street light pole tilt or damage, plus the management of asset maintenance. Through its cloud-based software and data generating technology, TTI is able to generate higher margin, recurring income on a global scale. 

For us, this is the exciting aspect of our investment in TTI, so we are particularly interested in seeing TTI update the market on this opportunity, as it starts to re-position itself in the market as a data analytics / smart technology company focused on infrastructure services.
SRG Global (SRG.ASX)
Operationally and financially, SRG has had a strong year while investing in their international expansion. They have achieved their stated strategic objective by forming a JV for the massive North American Dams market. SRS also acquired the NZ-based TBS group. TBS will provide strong annuity-type revenues with a focus on maintenance. However, most notable is the proposed merger with GCS. The merger of equals will create a larger group that cross sell and produce cost synergies.  

With the guidance for the FY18 narrowed to underlying EBITDA of $18 - 20 million (a strong increase from FY17), our focus will be on the progress with their international expansion, integration process with TBS, and work in hand. Of course, we will also need to pay close attention to the GCS result.
Gale Pacific (GAP.ASX)
GAP has had a somewhat disappointing year. We were originally looking for strong earnings growth for FY18, however management have now guided for a flat result.  Weather related events in both Australia and US have impacted revenues. Given this was probably an abnormal year and the long term thesis remains intact, we continue to hold. Going into FY19, there are still clouds on the horizon with a poor Australian grain harvest due to drought hitting some of their Australian commercial customers, however Management remain very positive on their many US opportunities. We are supportive of management buying back shares while the share price is depressed and debt levels low.
Apollo Tourism (ATL.ASX)
Apollo has had another busy year. After completing the acquisition of Canadream early in FY18, the company has made further acquisitions during FY18:
  • George Day Caravans - one of Western Australia’s largest range of new and used caravans, campers and motorhomes
  • Camperco, a small UK based Campervan rental operator. This provide Apollo a beachhead into Europe
  • The caravan brands Coromal and Windsor from Fleetwood. The acquisition “is expected to result in a more rational market and improved margins”

The FY18 NPAT result is expected to be around $18.5m and in-line with our expectations. This will be a credible result for Apollo’s first full year as a listed company. We will be expecting further growth in FY19 driven by organic growth, cost savings in manufacturing, and contributions from the recent acquisitions.
​People Infrastructure (PPE.ASX)
People Infrastructure is new to the portfolio this yea. The company provides contracted staffing solutions to their clients. After a strong first half, we expect the company to comfortably exceed their IPO forecasts. FY19 will see the inclusion of the recent acquisition, Recon Solutions. Recon is the first entry for IT sector for PPE. Additional growth should come from demand for disability services through the implementation of the NDIS. PPE is the largest provider of labour to the NDIS. We also expect further bolt-on acquisition though FY19.
Paragon Care (PGC.ASX)
Back in 2016, when Paragon had revenues of under $100m, they set an aspirational goal of $250m revenues.  With a capital raise and a string of acquisitions in FY18 (including expansion in New Zealand), they are on target for $265m in revenues in FY19. Paragon are now a substantial company and have certainly executed on their promises. While Paragon has historically an excellent track record at integrating acquisitions, the FY19 year will represent both a challenge and an opportunity given the number of new businesses in their stable.  Long serving CEO, Mark Samari resigned in February to focus on integrating acquisitions, and was replaced by experienced healthcare ececutive Andrew Just. 
Legend Corporation (LGD.ASX)
Legend is another new position for 2018. The company has had a chequered history with volatile earnings. A repeating characteristic has been for new acquisitions to plug the declining earnings or another operating business. However, in recent results this trend appears to have abated and organic growth has returned to their operating businesses.   Our entry into the position considered this history, but we felt there was a significant margin of safety to take a position. With the full year result pre-announced, our focus will be on the progress of their recent acquisition, the organic growth of their existing businesses, and the outlook for FY19.   
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Stock Commentary

    At TAMIM we are committed to educating investors on how best to manage their retirement futures.

    Sign up to receive our weekly newsletter:

    * indicates required

    TAMIM Asset Management provides general information to help you understand our investment approach. Any financial information we provide is not advice, has not considered your personal circumstances and may not be suitable for you.

    Archives

    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016
    April 2016
    March 2016
    February 2016
    December 2015

    Categories

    All
    2016 Presidential Election
    5G
    AGM Season
    Apple (AAPL.NASDAQ)
    Asia Small Companies
    ASX
    ATL.AX
    Aus Equity All Cap Portfolio
    Aus Equity All Cap Value Portfolio
    Aus Equity Growth Portfolio
    Aus Equity Income Portfolio
    Aus Equity Small Cap Portfolio
    Australian Stocks
    Autonomous Vehicles
    Big Four Banks
    Brexit
    Electric Vehicles
    Emerging Markets
    Energy
    ENN.AX
    FAANG
    Financials
    Fintech
    Global Equity High Conviction Portfolio
    Global Mobility
    Gmg.ax
    Gold
    Growth Stocks
    Guy Carson
    Healthcare
    Income Investing
    Infrastructure
    International Stocks
    Investment Thematics
    IT Services
    Mergers & Acquisitions
    Mobility
    Pharma
    Property
    Rare Earths
    REITs
    Reporting Season
    Retail
    Robert Swift
    Ron Shamgar
    SLK.AX
    Small Cap Income Portfolio
    Small Caps
    Stock Report
    Takeovers
    Technology
    Telco Stocks
    Telstra (TLS.ASX)
    Tourism
    TPG
    Utilities
    Value Investing
    Video
    Wesfarmers (WES.ASX)

    RSS Feed

TAMIM | Equities | Property | Credit
​

TAMIM Fund
Australia All Cap
Australia Small Cap Income
Global Mobility
Global High Conviction
Credit

Listed Property
TAMIM Property
Company
About
Contact
Insights
Invest Online
Login
Other
Privacy Policy
Terms & 
Conditions
​Disclaimer
Contact
Level 4, 55 Grafton Street
Bondi Junction, Sydney NSW, 2022

1300 750 007

ima@tamim.com.au

DISCLAIMER

​The information provided on this website should not be considered financial or investment advice and is general information intended only for wholesale clients ( as defined in the Corporations Act). If you are not a wholesale client, you should exit the website. The content has been prepared without taking into account your personal objectives, financial situations or needs. You should seek personal financial advice before making any financial or investment decisions. Where the website refers to a particular financial product, you should obtain a copy of the relevant product services guide or offer document for wholesale investors before making any decision in relation to the product. Investment returns are not guaranteed as all investments carry some risk. The value of an investment may rise or fall with the changes in the market. Past performance is no guarantee of future performance. This statement relates to any claims made regarding past performance of any Tamim (or associated companies) products. Tamim does not guarantee the accuracy of any information in this website, including information provided by third parties. Information can change without notice and Tamim will endeavour to update this website as soon as practicable after changes. Tamim Funds Management Pty Limited and CTSP Funds Management Pty Ltd trading as Tamim Asset Management and its related entities do not accept responsibility for any inaccuracy or any actions taken in reliance upon this advice. All information provided on this website is correct at the time of writing and is subject to change due to changes in legislation. Please contact Tamim if you wish to confirm the currency of any information on the website.  

magellen, kosec, clime, wilson, wam, montgomery, platinum, commsec, caledonia, pengana, tamim

  • HOME
  • INVESTMENTS
    • Equities >
      • Australia All Cap
      • Australia Small Cap Income
      • Global Mobility
      • Global High Conviction
    • Property >
      • Listed Property
      • TAMIM Property
    • Income >
      • Credit
  • INSIGHTS
    • Insights
    • Weekly Reading Lists
  • ABOUT
  • CONTACT