Looking for some new additions to your portfolio? These three businesses have potential for above-market returns.
Ardent Leisure (ASX: AAD) is one of Australia's most successful owners and operators of premium leisure assets including Dreamworld, WhiteWater World, SkyPoint, AMF, Kingpin Bowling, d'Albora Marinas and Goodlife Health Clubs.
In addition Ardent owns and operate a series of bowling-based family entertainment centres known as Main Event. Based in Texas, the Main Event division is showing consistent growth in revenues and profits. Texas has a higher GDP than Australia, and a population of 24 million. The plan is to have 15 Main Event centres opened by 2015. Current centres have attracted an average of 500,000 customers per year.
AAD is expected to have a distribution yield of 6.5% (at $1.68); however, the attraction lies in the superior growth prospects of the US operations and the benefits flowing from a declining Aussie dollar.
Integrated Research (ASX: IRI) focuses on developing performance monitoring diagnostics and reporting software. The major proprietary offering is Prognosis, a real-time performance software suite which has gained global acceptance. Customers include airlines, banks, stock exchanges and telecommunication companies. Approximately 20% of revenues are expended on research & development.
Indicative 2014 projections: price earnings 15, return on equity 35%, and a grossed up yield of 6.2%. Caution: protracted licensing talks with some major customers may impact 2013 earnings.
With active management, no debt and proprietary software tied into strong growth segments (mobile communications, performance reporting, information technology), IRI is fairly compelling as a well founded medium growth story. Given the high exposure to international currencies, a weakening Aussie dollar is an added bonus.
Yellow Brick Road (ASX: YBR) presents itself as a no-nonsense financial platform with a range of products and services including accounting, financial advice, residential mortgages and insurance. The founder, Mark Bouris, has successfully sold himself as the face of the business – important marketing wise when competing against the big banks.
Yellow Brick Road listed in 2011, and is yet to make a profit – however the positioning of itself as a 'one-stop financial shop' is rapidly gaining traction and it won't be long before investors see the benefits.
Foolish takeaway
This Fool believes one of the purposes of a diversified portfolio is to own well structured businesses at various stages of development. These three companies have positive growth prospects, are well positioned in their markets and are reasonably priced — worth consideration.
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Motley Fool contributor Peter Andersen owns shares in Ardent Leisure, Integrated Research and Yellow Brick Road.
