Here are two companies that offer good growth potential and can boost your portfolio. Oil and gas is a big theme for 2014 onwards with the emerging LNG export industry. Similarly, telecommunications, mobile and cloud computing are growing in service provision while the players are consolidating, creating opportunities for nimble companies.
Senex Energy (ASX: SXY) an oil and gas producer in the Cooper-Eromanga Basin region, has been growing oil production in a serious way, almost doubling it recently from about 600,000 barrels of oil equivalent (boe) to about 1.25 million boe.
For FY 2014, it is forecasting another rise between 1.4 million boe and 1.6 million boe. Likewise, it was able to increase its 2P reserves by 4 million to 6 million boe, so both volume and capacity will be expanding future earnings.
December quarter
In the December quarterly report released last week, it hit record oil production of 350,000 boe, up 16.7% from the previous quarter. At this rate the production forecast above is on target. Sales for the quarter were $44.5 million, setting another quarterly revenue record.
Senex is the largest operator in the Cooper-Eromanga Basin region, having some 11,000 sq km of permits under operation, located in areas of known oil and gas fairways and close to existing infrastructure.
Growth potential
It has a PE of 11.9 and pays no dividend, yet the growth potential in earnings and production capacity may give investors good compensation now and further reward in the mid-term as more production and development is achieved. For comparison, look at other producers in the same region such as Santos Limited (ASX: STO), Beach Energy Limited (ASX: BPT), Cooper Energy Ltd. (ASX: COE) and Strike Energy Ltd (ASX: STX).
M2 Group Ltd (ASX: MTU) is a service provider for digital telecommunications and power and gas products. Since 2005 it has had uninterrupted NPAT growth, which in the last two years is up 58.4% from $27.63 million to $43.78 million.
It recently purchased Dodo and iPrimus, both internet service providers and phone/mobile service operators. It has built up a base of telecom and next generation platforms to expand into mobile and cloud computing.
November AGM presentation
The company showcased its NBN service through Dodo and how it can add this service without any incremental investment. The service is low priced for consumers, and it plans to use its subscriber base to offer more complementary services similar to its utilities service. Insurance is one avenue for growth it is considering.
For business customers, it has its Commander and Engin service platforms that offer telephony service, data transmission and storage as well as cloud computing. It also offers advertising bundling, combining TV and radio advertising with outdoor billboards.
Growth potential
Although the company states in its outlook that it is targeting low single-digit growth in its consumer and business subscriber base, it is adding more services that each segment can take up. It is projecting revenue to rise in its FY 2014 guidance to between $970 million and $1.03 billion, up from $681 million in 2013.
Earnings are likewise anticipated to rise between 37% – 60%, from $43.8 million to $60 million – $70 million. It had two acquisitions in the past two years, so now it is wiser to work on organic growth and integration of the two new businesses.
Foolish takeaway
Great success in the past doesn't automatically translate into the future. Projections and guidance aside, look for business models and strategies that are based on sound financial practice and follow each and every report, update and media release you can get on a company. These two companies have shown that they have what it takes, and the forward momentum is still growing.
