In the whirlwind of reporting season, two companies with strong growth prospects have caught my eye this week; oil and gas producer Senex Energy Ltd (ASX: SXY) and dedicated payment processing company EML Payments Ltd (ASX:EML).
Senex Energy – locked and loaded
There wasn't much to get excited about in the results presented by Senex Energy Ltd (ASX: SXY). Revenues were down on lower oil production. Net Profit was up, but still a loss. And the share price… well the share price didn't budge.
However digging into the details it appears that Senex is finally in position to start realising its substantial growth potential.
Have the stars finally aligned?
Senex Energy claims extensive reserves of natural gas which make up 90% of the company's total 2P (proved and probable) energy reserves.
This is a valuable mix to have at the moment with strong gas demand from major LNG export projects like Santos Ltd's (ASX: STO) GLNG, as well as from domestic supply constraints. However the Senex share price has struggled because its gas is still locked in the ground and drilling wells costs a boat load of money.
Senex has spent the last two years raising cash and notching up smart funding arrangements to accelerate the development of its gas assets. The company has $134 million in cash on hand and plans to invest up to $100 million over the next 12 months.
As I noted earlier this year I don't think the market will re-value Senex Energy shares until the gas business shows signs of producing material volumes, but that day is starting to look a lot closer.
EML Payments – churning out free cash
EML Payments provides reloadable and non-reloadable payment cards like gift cards and processes the transactions.
Compared to Senex Energy the company delivered a far more exciting full year result with revenue climbing 150% and cash flow from operations increasing from $2 million to $12 million. (If you are looking at the financial statements yourself, I have subtracted $7 million of cash which EML must pay to partners).
I thought it was a strong result and it positions the company to continue aggressive growth in 2018.
EML payments is a is relatively capital light business which means cash flows increase easily as the business signs new deals.
With a foothold in the U.S. market EML has a sizeable opportunity to expand as the country continues to shift from cash payments towards cards and I think it will continue to win over the next three years.
EML Payments doesn't currently pay a dividend, however if you prefer the companies that do start by checking out this top pick.
