The Dow Jones and S&P/ASX 200 (INDEXASX: XJO) have soared to record territory. With an increasingly positive outlook on the US–China trade deal and potential further interest rate cuts, the equity markets could be set for a Christmas rally.
Here are 3 ASX 200 growth shares that can perform strongly in both the short and long-term.
1. EML Payments Ltd (ASX: EML)
EML provides payment technology solutions for payouts, gift incentives and rewards. The company's recent $423 million acquisition of Irish firm, Prepaid Financial Services (PFS) is a gamechanger and could act as a springboard to take the company to new heights.
The rationale for the acquisition includes increasing EML's financial scale, increasing its operating leverage, driving additional growth and adding new products to its existing portfolio. The acquisition also brings about a number of synergies between the 2 businesses, along with savings as transactional fee costs can be pooled together. While the 2 companies operate in the same space, FPS generates more than 40% of its revenues from business to customer general purpose reloadable (GPR) and digital banking, while EML is more skewed towards gifts and incentive-related products.
EML itself generates a gross debt value (GDV) of approximately $5 billion. But at the EML investor presentation held on 11 November, CEO Tom Cregan stated that "if the two companies were combined for the whole of FY20 GDV would be north of $18.3 billion. Pro forma revenue in FY20 would be circa $208 million. Pro forma EBITDA would be circa $65 million."
This greatly overshadows EML's FY20 forecast that EBITDA would be between $38.5–42.5 million. This deal is subject to regulatory approval, so growth statistics are just pro forma for FY20, but ultimately will provide the platform for growth in FY21 and beyond.
2. Appen Ltd (ASX: APX)
Appen recently announced a full year earnings upgrade, marking its 13th earnings upgrade since inception. It announced that the company's full year underlying EBITDA for FY19 is estimated to be in the range of $96–99 million (assuming A$1 = US$0.74). If current exchange rate levels persist, it could add a further $1–1.5 million to underlying EBITDA. The company's previous guidance for underlying EBITDA was between $85–90 million.
This could represent a minimum year-on-year growth of 34%. I believe the earnings upgrade could create further tailwinds for the Appen share price.
3. A2 Milk Company Ltd (ASX: A2M)
Following the theme of announcements creating share price tailwinds, the a2 Milk growth train is back! Following a strong FY20 outlook in the company's annual general meeting, the a2 share price is up more than 20% in two weeks.
The company cited stronger EBITDA margins and strong revenue growth across all key regions including:
- China label infant nutrition sales forecast to be approximately $135 million, representing a growth rate of 84%
- Cross-border e-commerce infant nutrition sales to be approximately $155 million, representing a growth rate of 54%
- ANZ English label infant nutrition sales forecast to be approximately $350 million, representing a growth rate of 9%
- US sales forecast to be approximately $27 million, representing a growth rate of 110%
- Australian fresh milk sales forecast to be $75 million, representing a growth rate of 12%
The company has set the stage for a strong FY20 and could see the a2 share price have a crack at previous highs.
