Event non-ATF Mobile

S&P/ASX 200 index has gone down by 25 points today (AEDT 3:15 PM), with majority of the main indexes also trading in the red zone. Despite this, few stocks have gained some momentum today with the release of some positive updates. Let’s take a look at tow such stocks.

Data# 3 Limited (ASX: DTL)

Australian business technology solutions leader, Data# 3 Limited, is expecting to report strong earnings growth for the six months ending 31 December 2019 i.e. first half of FY2020. In an update provided on 21 January 2020, DTL announced that its consolidated net profit before tax (NPBT) for H1 FY20 is expected to be at the top end of the guidance of $11.0 to $12.5 million. Further, the first half NPBT is expected to be around $12.5 million, subject to finalizing the interim accounts and the audit review.

During the last year also, the company had witnessed strong earnings growth. In FY19, the company’s total services revenues increased by 13% to $247 million. Net profit after tax (excluding minority interests in Discovery Technology) increased by 28.7% from $14.1 million to $18.1 million which represented basic earnings per share of 11.76 cents, an increase of 28.7% from 9.14 cents in the previous year.

Profit Growth (Source: Company Reports)

During FY19, the major highlight for the team was the 35.3% growth in public cloud-based revenue, reaching $362.2 million.

At the recently held Annual general meeting AGM, the management had communicated that one of the company’s greatest strengths is its ability to adapt and keep evolving with customer demands. At the time of AGM, the company had a robust business, no material debt, solid long-term customer relationships, committed supplier partnerships, and a highly experienced and productive team.

It is to be noted that the three-year strategic planning process undertaken by the company for FY19 – FY21 identified the following market assumptions and trends in the adoption and use of business technology:

  • Digital transformation (being the use of new digital technology) is a high priority in business strategy
  • The overall IT market growth is fuelled by digital transformation.
  • Industry consolidation is creating opportunity
  • Cyber security is our customers’ number one priority
  • Data and analytics are leading drivers of competitive differentiation
  • Cloud provides the platform for automation, artificial intelligence, analytics, blockchain and many more innovative technologies
  • Skilled resources are becoming more scarce.

In FY20, the company aims to capitalize on the predicted IT industry growth in the Australian market. It is expected that the digital transformation will continue to drive technology investment providing further opportunity for Data# 3’s solutions and services.

The company is planning to reveal the audited interim results and interim dividend on 19 February 2020.

On the stock performance front, DTL stock has provided a return of 54.20% to its shareholders in the last six months. At AEDT 3:15 PM, DTL stock was trading at a price of $4.260, up by 5.446% intraday, close to its 52-weeks high price of $4.470.

Pact Group Holdings Ltd (ASX: PGH)

Pact Group Holdings Ltd, a leading provider of specialty packaging solutions in Australasia, has commenced a sale process in respect of its Contract Manufacturing division and has appointed Citigroup to assist in the sale process.

Contract Manufacturing Overview

  • Leading supplier of contract manufacturing services in Australia for the home care, personal care and health and wellness segments
  • Extensive service offering including product development and innovation, manufacturing, packing and promotional services
  • Attractive customer portfolio which includes major brand owners, supermarkets and hardware stores
  • Manufacturing capability for powders, liquids, aerosols and therapeutic nutraceutical products
  • Broad product portfolio including laundry detergents and softeners, home cleaning products, insecticides, skin care products, hair care products, vitamins and supplements
  • The breadth of its innovation and manufacturing capability is unique with hundreds of products in development
  • Sales revenue of $372 million and EBITDA of $25 million (FY2019)

Contract Manufacturing is an attractive business that enjoys leading positions in sectors with strong growth potential, but Pact’s success over the longer term is dependent on its ability to deliver organic growth and restore margins in the core packaging business and divesting Contract Manufacturing will only simplify the portfolio and sharpen the company’s focus on driving improved returns in the remaining Group. The company has undertaken a detailed strategic review of the business, including a review of its portfolio. The company believes that the divestment will strengthenits balance sheet as well as improve its financial flexibility.

At the recently held AGM, Pact Group stated its three key priorities in the near term which are as follows:

  • Firstly, deliver improvements in core business fundamentals. Get the basics right.
  • Secondly, work towards the company’s 2025 Sustainability Promise through delivery of profitable growth in this essential space.
  • And finally, clarify Pact’s strategy, to provide direction into the future.

In the last one year, the stock of Pact Group has provided a negative return of 30.49% to its shareholders. By AEDT 3:15 PM on 21 January 2020, PGH was trading at a price of $2.750, up by 2.23% intraday, with a market cap of around $925.34 million.

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