Brokers have their eyes on this mixed bag of speculative picks this week.
Macquarie Telecom Group Ltd (ASX: MAQ)
Cannacord Genuity has upped its price target from $26.80 to $27.10 and maintained its buy rating on telecommunication and hosting services company Macquarie Telecom Group Ltd after its FY18 results were reported to be in line with progress.
Cannacord labelled Macquarie Telecom’s operations as “smooth sailing” after FY18 revenue of $233.6 million came in just above the broker’s forecast of $232.4 million with hosting revenues up 17% year-on-year.
The broker thinks the company’s cash conversion of 109% is “extremely healthy” – well ahead of its 99% forecast, with Cannacord increasing its group revenue forecast for FY19 by 2%, also nudging up its FY19F EBITDA forecast by 1%.
On Cannacord’s forecasts Macquarie Telecom shares are trading on a FY19 EV/EBITDA multiple of 9.2x, but the broker estimates its shares could trade on a 10.8x multiple, even allowing a 15% discount for illiquidity.
Autosports Group Ltd (ASX: ASG)
Wilsons has placed a buy rating on luxury and prestige motor vehicle dealer group Autosports Group Ltd with its 12 month price target of $1.84 under review.
According to Wilsons, Autosport’s FY18 results were “broadly in line” with forecasts, with normalised NPATA of $31.7 million up 8% on FY17 and coming in 3% above Wilsons’ estimate.
Autosports management expect further EPS growth in FY19 driven by its Melbourne and Canterbury BMW acquisitions, but the company has also flagged challenging conditions throughout FY19 in the wider vehicle market.
Wilsons says Autosports EPS growth is encouraging, but will be dependent on the new vehicle sales market.
McPherson’s Ltd (ASX: MCP)
CCZ Equities Research has a buy recommendation on small cap consumer products company McPherson’s Limited as its green and offshore growth strategies continue to build momentum.
According to CCZ, offshore growth surprised the broker on the upside when its FY18 results came through – with revenue of $18 million more than doubling from $8 million in FY17.
Sales in China increased from $1 million to $7 million over the period with the company focused on a ramp up of activity across China and Singapore.
CCZ has expectations of operating cash flow of $15 million for FY19 and capex of $4 million with FY18 cash flow coming in at $6.9 million – $2 million lower than the broker’s expectations.
McPherson’s balance sheet has now de-leveraged and in the view of CCZ, holds capacity for between $50 million and $70 million of acquisition potential should a suitable opportunity emerge.
Southern Cross Electrical Engineer Ltd (ASX: SXE)
Moelis Australia think FY18 results for electrical services supplier for major resource projects, Southern Cross Electrical Engineer Ltd look good, with the broker expecting better for FY19.
According to Moelis, Southern Cross’ FY18 results came in “broadly ahead of expectations” with NPAT and EBITDA both beating Moelis and consensus estimates and the fully-franked 3c per share final dividend a “positive surprise’.
FY19 revenue guidance for Southern Cross is expected to be greater than $400 million, according to the broker, with Moelis saying the company has an “attractive growth profile” partly driven by its exposure to the multi-year, infrastructure and investment cycle which is expected to take place over the next few years.
Macmahon Holdings Limited (ASX: MAH)
Moelis also has mining services company Macmahon Holdings on its buy list after the company delivered on expectations for FY18 with a potential upside for FY19.
Macmahon’s FY18 EBIT of $41.2 million was slightly above the broker’s $40.7 million estimate with its FY19 EBIT guidance of between $70 million and $80 million appearing conservative given the potential conversion of near term growth opportunities on top of $1 billion contracted revenue.
Moelis considers Macmahon undervalued at 3.2x FY19e EBITDA and 7.1x EBIT with the broker upping its price target to 30c per share from 28c.
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