The ‘Rising Stars’ of Australian Stocks

I spent an interesting day last week at the 8th Annual Microequities Rising Stars small-cap conference at the Four Seasons Hotel in Sydney.

Fund managers, private investors and industry players flock to this conference year after year. It’s a great platform for small, fast-growing listed companies to tell their story.

I sat in on all the presentations.

Usually with these events, you don’t tend to get big revelations from CEOs. Companies have become more and more cautious with the information they reveal. Remember that just over a year ago, Newcrest Mining Ltd [ASX:NCM] fell afoul of the laws concerning continuous disclosure.

That little mistake cost Newcrest $1.2 million in fines last week.

I won’t cover every company’s Rising Stars conference presentation in detail. But I’ll give you a quick view of the firms I thought were most interesting…

Diagnosis on the go

Pro Medicus [ASX:PME] provides software for diagnostic imaging to radiologists. The company has more than 30 years of experience and its products are world-class.

Pro Medicus recognises the importance of staying ahead of the technological curve. Its latest generation of software runs on mobile devices.

It gives medical specialists fast access to 3D imagery via 3G or 4G. This speedy access, unthinkable just a few short years ago, is helping to drive adoption of Pro Medicus’ products.

The company’s CEO, Sam Hupert, recalled a story that shows the impact these products can have on people’s lives.

Not long ago, one of Sydney’s top MRI experts was enjoying a day out at the circus with his wife and daughter…until his phone rang.

When the expert stepped out of the big top to take the call, he discovered that the doctors at his emergency ward were working hard to save a patient. The neurological symptoms were baffling the specialists.

The expert calmly asked to see the high-density image from the brain scans. Using Pro Medicus technology, the expert was able to see the scans on his smartphone within seconds.

In less than a few minutes, the expert had spotted the problem and explained the solution.

The specialists saved the patient’s life. And the expert could enjoy the rest of the day at the circus with his wife and daughter! This kind of remote medical tech is a godsend for time-poor radiologists.

As Mr Hupert explained, the Pro Medicus business model is moving away from license-based revenue and towards transaction based revenue. Charging its radiologist customers per ‘click’ or per exam will help spread PME’s revenue more evenly.

This move will also let Pro Medicus capture more of the growing diagnostic imaging market.

It’s an exciting little company with similar positive trends as another Australian stock we picked last year in Australian Small-Cap Investigator. Although PME shares have had a good run, we’ll watch it with interest.

On the hunt for targets

BigAir Ltd [ASX:BGL] provides fixed wireless internet access to businesses across Australia. But the company has recently expanded into other services. It now offers what it calls ‘complete communications solutions’.

I already knew most of the detail in BigAir CEO Jason Ashton’s speech. However, I hadn’t focused on the company’s acquisition strategy, and the importance of its most recent purchases.

A lot of companies talk a good game when it comes to M&A activity. But BigAir actually has the runs on the board to back this up.

BigAir started consolidating the telco services sector a few years ago when the company began generating healthy cashflow.

Mr Ashton views BigAir’s most recent acquisitions — Anittel Communications Pty Ltd and Star-Tech Communications — as two of the company’s most important steps.

Anittel expands BigAir’s capabilities in unified communications, an industry term that refers to all forms of call and messaging services, giving the user a consistent experience. Star-Tech will help expand the company’s fixed wireless and community broadband offering.

Both companies will boost BigAir’s revenues. But more importantly, they should provide a profit boost by cross-selling their products into BigAir’s growing customer base.

BigAir still has a busy ‘dating card’ of potential takeover targets and plenty of financial firepower to keep the M&A ball rolling.

Sin stocks make money too

Now here’s a company that’s sure to start an emotional debate. With a market cap of $60 million, eBET Ltd [ASX:EBT] develops and markets a range of IT services to the gaming industry. eBET’s reach extends to nearly a quarter of Australia’s pokie machines.

I’d place eBET in the same category as alcohol and tobacco companies — the ‘sin stocks’. These firms are in industries that are perfectly legal but tend to attract criticism due to how they make money.

But I’ll leave the ethics of the gambling industry to one side. There’s no denying that regulatory scrutiny has helped to create big barriers to entry.

What’s more, eBET is growing profits and dividends quite handsomely…and the company is about to push into the Victorian market.

That makes it a story worth following.

All up, the day in Sydney showed me that the Australian stock market is still brimming with exciting small-cap opportunities.

If you read Australian Small-Cap Investigator, you’ll know that investing in this market is the best and most exciting way you can get your ‘punting’ money working harder.

I call it ‘punting’ money to remind you that if you buy shares in emerging companies, you’re taking on more risk than if you buy a blue-chip stock. Sometimes you’re taking on a lot more risk.

Make no mistake, this is a speculative game. But when you back the right company at this end of the market, your profits can be truly explosive.

Cheers, Tim Dohrmann+
Small-Cap Analyst, Australian Small-Cap Investigator

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