|Summary: The small caps sector has lagged the broader market for some time, but the tide could finally change in 2014 thanks to a confluence of multiple factors. These include a rebound in the resources sector, a falling dollar, increased mergers and acquisitions activity, a rotation to industrials, and event-based investing.|
|Key take-out: Eureka Report’s Uncapped 100 stocks have generated a total return of 21.5% on a market cap weighted basis since January, compared with a 6.1% loss by the S&P/ASX Small Ordinaries Index.|
|Key beneficiaries: General investors. Category: Shares.|
The Uncapped 100 is on track to close the year with a solid lead over the market, even as equities struggle to finish the last month of 2013 on a positive footing.
Eureka Report’s collection of the most exciting emerging stocks has generated a total return of 21.5% on a market cap weighted basis, or 7.5% ahead of the ASX All Ordinaries Index including dividends.
However, the Uncapped 100’s strong showing belies the tough year for most market juniors, with the S&P/ASX Small Ordinaries Index chalking up a 6.1% loss since January.
The sad truth is small cap stocks are entering unprecedented territory as they lag the S&P/ASX 200 Index by a whopping 19% in 2013 following last year’s 11.4% underperformance to their bigger rivals. Never before has the Small Ords fallen behind the top 200 benchmark by double-digits over two consecutive years, and you need to go back to 2000 to find a worse relative annual outcome for the juniors.
The underperformance isn’t all driven by small resource stocks either. The S&P/ASX 200 Industrials Index’s 15.7% year-to-date jump is nearly twice that of their smaller counterparts.
Passing the baton
But it is this woeful result that is partly fuelling my belief that 2014 will be the year for small caps. Besides the “reversion to the mean” argument, there are fundamental reasons to suspect that the New Year will provide some tailwinds to the embattled sector.
For one, the expected pick-up in economic growth bodes well for small cap stocks. Economists believe that Australia’s gross domestic product (GDP) has troughed in the September quarter at 2.3% and will accelerate in 2014, as shown in the chart below.
What’s interesting is that the Small Ords has outperformed the large caps in four of the last five cases when the quarterly GDP figure rebounded from below 2.5%. The average capital gain in the four quarters from the trough in GDP since 2000 for the Small Ords is 2.15%, compared with the S&P/ASX 200’s 1.12%.
What’s more, there’s room for upside earnings surprise among small industrials stocks as the median earnings per share (EPS) consensus estimate is forecasting growth of 10.5% in 2013-14 compared with the five-year average of just over 15%.
If the economy is re-accelerating, I would expect to see stronger EPS growth rates given the operating leverage and the fact earnings are cycling off a relatively low base. This doesn’t mean it’s carte blanche for small caps. Some are better placed to run ahead than others.
Five themes to watch for
I am bullish on risk assets for 2014 and Shane Oliver made a compelling case for growth assets last week. I believe embattled cyclical stocks will finally feel some love from the market as rising prices in the large caps push investors up the risk curve in search of value.
So, while next year will likely be far kinder to small caps, 2014 will belong to emerging resource companies if things play out to expectations (see Tim Treadgold’s article on December 6).
1) Junior miners returning from the cold: I am not calling the return of a golden era for this out-of-favour sector, but I expect a large chunk of the pessimism drowning these stocks to subside given the 46% crash in the ASX Small Resources Index so far this year. This is the biggest loss since the dark days of the global financial crisis in 2008.
Sceptics should remember this – it’s dangerous to bet against commodities (and, by extension, mining equities) when global growth is picking up pace. Economists are forecasting growth of 1.96% in calendar 2014 for the G10 countries (the world’s 10 largest economies), which would mark the fastest economic expansion for the group since 2010.
This doesn’t mean junior resource companies will be able to completely shake off funding fears, as capital for new projects will still be hard to come. This will be particularly so for high-cost mines due to the ramp-up in supply of a number of hard commodities in the coming years from the mining majors.
This is why I have, and continue to favour, well capitalised emerging miners with low-cost operations that are transitioning from an explorer to a producer.
The two from the Uncapped 100 that check these boxes are African copper miner Tiger Resources (TGS) and gold and base metals producer YTC Resources (YTC). Gold producer Beadell Resources (BDR) is also well placed, although the outlook for gold is harder to read given that the price of the precious metal isn’t generally bolstered by economic activity.
However, don’t expect sentiment to turn markedly for the sector in the short run. Mining heavyweights Rio Tinto (RIO) and BHP Billiton (BHP) will have to rally by at least 30% from their July lows before we will see greater investor interest in mining minnows. We have an “outperform” on the three stocks.
2) Northern exposure: Companies that generate most of their sales in the United States and Europe will be in a sweet spot for two reasons.
The first is the falling Australian dollar. If you thought the upside from the exchange rate is largely factored into stock valuations, you’d be wrong. Most analysts are still using rates that are close to parity to the US dollar in their models, but there’s good reason why they are slow to react.
While the Australian dollar has tumbled sharply to around US90 cents, most companies will not feel the impact for a while yet as sales are booked on an ongoing basis throughout the year. The 365 day moving average for our dollar is still hovering around US99.2 cents, or 10% above where the spot price is.
The other factor is economic growth and it appears that the US, Europe (including the UK), and maybe even Japan will be leading the charge. It is the change in the rate of growth I am referring to, and not the absolute growth number.
These economies are in the midst of rebounding from rock bottom levels and their reawakening heralds a pretty exciting moment for companies leveraged to these markets.
While most small cap companies tend to be more domestically focussed, there are a handful of Uncapped 100 stocks (outside of commodity producers that typically sell their products in US dollars) that are well placed to benefit from this thematic.
Consumer financing company ThinkSmart (TSM) is arguably the most exposed now that management has agreed to sell its Australian and New Zealand operations to rival Flexigroup (FXL) so it can concentrate fully on its UK expansion.
The market’s attention has been captured by the dramatic drop in the Australian currency against the US greenback, but the local dollar’s fall from grace against the British pound is just as pronounced as the exchange rate is around a near four-year low of 54.8 pence.
The chart looks ominous for the Aussie and our dollar could trade lower given that the UK economy has been recovering strongly. That’s good news for ThinkSmart, which will generate almost all of its profit in pound sterling after it signed deals with a number of leading UK retailers to provide financing solutions to their customers.
Other Uncapped 100 stocks with material exposure to this thematic include communications equipment maker NetComm Wireless (NTC), medical disinfection device developer Nanosonics (NAN), property owner Astro Japan Property Group (APA) and global payment solutions company eServGlobal (ESV).
We have an “outperform” rating on Nanosonics and eServGlobal. We do not have a recommendation on NetComm or Astro.
3) Barbarians at the gate: Predicting an increase in merger and acquisitions (M&A) activity won’t come as much of a surprise as we have seen a 63.6% surge in the value of announced deals in the current quarter to $23.7 billion compared with the September quarter. This trend is likely to continue into 2014 as M&A activity is still low by historical standards.
I suspect private equity buyers will be helping fuel takeovers too as the spate of initial public offers by private equity vendors will leave these deal makers cashed up and hungry for the next opportunity, particularly while interest rates are still hovering around historical lows.
The area that these buyers are likely to be active in is mining services. Private equity has a long history of playing in this sector and they know the industry well. Bradken (BKN), which made a takeover bid for Austin Engineering (ANG) last night, used to be owed by private equity before its market float in 2004.
Further, many mining services firms are under pressure due to the drop-off in project work and are trading materially under their net tangible asset values.
It isn’t wise to invest in a stock just for its takeover potential, but a number of mining services companies are looking good value despite the risk of an earnings downgrade, and their share prices could just get a kick next year from takeover speculation.
Mining services stocks in the Uncapped 100 with an “outperform” recommendation include LogiCamms (LCM), NRW Holdings (NWH) and WDS (WDS).
4) The great rotation: We are likely to see some capital rotated out of better-performing industrial stocks and into beaten-down cyclical names as confidence towards global growth improves next year.
One small cap sector that could be used as a funding source is telecommunications. Many in the sector have generated enviable total returns in 2013 and similar returns are unlikely to be repeated. Stocks like Vocus Communications (VOC) has delivered a total return in excess of 80% this calendar year, while M2 Telecommunications (MTU) and Amcom Telecommunications (AMM) have delivered a more than 40% total return to their shareholders.
The yields on most of these stocks are close to the bottom of their five-year averages, and if interest rates start to rise next year as some economists are expecting, their appeal could tarnish – although maybe less so than industry giant Telstra, given that the smaller telcos have better growth options.
Having said that, I am resisting changing my “outperform” recommendation on M2 for now as the stock has come off its highs, has a higher expected yield than most of its peers, and is trading at an undemanding one-year forward price-earnings of around 12 times, or a 30% discount to its five-year average.
I am also expecting some profit taking from the big banks, with the cash being redeployed to smaller lenders trading on a more attractive valuation, such as Wide Bay Australia (WBB). I am recommending the stock as a buy based on the belief that the Queensland regional housing market will rise along with the national market. If that comes to pass, we will see a re-rating of the stock.
5) Event investing to persist: I might have a positive view on the economy for 2014, but I think “event driven investing” will play an ever increasing role in most investment portfolios.
Event-based investing refers to buying a stock on the belief it will run hard if management achieves a company specific event or milestone. This milestone is not directly tied to the broader economy, and even if we were to fall into a recession this should not stop a significant re-rating of the stock.
The most obvious examples can be found in the biotech sector, and while there are risks involved (as highlighted in Justin Braitling’s article this week), the industry has matured remarkably over the past decade. Perhaps the most promising development is the fact that it has become far easier to find capable managers with a proven track record in biotech these days than it was just a few years ago.
Event investing isn’t just about biotechs. It is mainly about commercialising intellectual property in whatever sector it might be and the risk profile for such stocks is similar to investing in an early stage explorer.
The truth is, Australia’s love affair with the mining industry is unlikely to run as passionately as it did before. Even hardened speculators have been taught the importance of diversifying across sectors following the walloping of the junior resources sector. This is one lesson investors aren’t likely to forget anytime soon.
Think big, go smalls!
This is the last Uncapped article for the year. While stocks with my “outperform” rating have returned some of their robust gains in the past few weeks, they are still up 10.1% since we first rated the stocks, or 21.4% on an annualised basis. This is 11.6% ahead of the S&P/ASX Small Ordinaries Index and 7.4% above the S&P/ASX 200 Index. I am expecting 2014 to be a big year for emerging stocks, as you can tell from the positioning of my portfolio, and I look forward to taking you further into the world of small caps in the New Year. Have a wonderful and safe festive season.
Uncapped 100 stocks with an "outperform" recommendation
|Name||Code||Date of rec||Price||Article Name|
|eBet||EBT||26-Jun-13||$1.130||Small cap with biggest earnings upgrade|
|Silex Systems||SLX||03-Jul-13||$2.320||Why a dog can be an investor's best friend|
|Newsat||NWT||03-Jul-13||$0.400||Why a dog can be an investor's best friend|
|Tiger Resources||TGS||03-Jul-13||$0.190||Why a dog can be an investor's best friend|
|M2 Telecommunications Group||MTU||10-Jul-13||$6.020||Big expectations for small caps|
|Starpharma Holdings||SPL||17-Jul-13||$0.940||Five bargains for under a buck|
|Colorpak||CKL||17-Jul-13||$0.725||Five bargains for under a buck|
|GI Dynamics||GID||17-Jul-13||$0.600||Five bargains for under a buck|
|Horizon Oil||HZN||17-Jul-13||$0.355||Five bargains for under a buck|
|Collins Foods||CKF||07-Aug-13||$1.760||The next dividend dazzelers|
|LogiCamms||LCM||07-Aug-13||$1.470||The next dividend dazzelers|
|NRW Holdings||NWH||14-Aug-13||$1.140||A mining services revival?|
|WDS||WDS||14-Aug-13||$0.590||A mining services revival?|
|Thinksmart||TSM||21-Aug-13||$0.355||Biggest smalls earnings surprises|
|Beadell Resources||BDR||28-Aug-13||$0.865||Short-selling gold signals|
|Universal Biosensors||UBI||04-Sep-13||$0.680||Smalls in a sweet spot|
|Specialty Fashion Group||SFH||18-Sep-13||$0.930||Small cap surprises for 2014|
|Mint Wireless||MNW||02-Oct-13||$0.180||Four new stocks for the Uncapped 100|
|YTC Resources||YTC||09-Oct-13||$0.260||Xmas sale starts early for small caps|
|Ridley Corporation||RIC||16-Oct-13||$0.850||Appetisers from the agri stocks field|
|Wide Bay Australia||WBB||16-Oct-13||$5.600||Appetisers from the agri stocks field|
|STW Communications||SGN||30-Oct-13||$1.580||Small consumer stocks at Christmas crossroads|
|Retail Food Group||RFG||30-Oct-13||$4.580||Small consumer stocks at Christmas crossroads|
|Nanosonic||NAN||06-Nov-13||$0.830||First profit, first choice for stock pickers|
|AMA Group||AMA||06-Nov-13||$0.365||AMA chief's double plan|
|eServGlobal||ESV||13-Dec-13||$0.700||Calculating Bitcoin's flow-on effects|
Uncapped 100 - Australia's most interesting small cap stocks
|Small cap stocks covered by the Uncapped team|
|Code||Name||Rationale||Market cap ($m)||Total return 1-year (%)||Sector (GICS)|
|MTU||M2 Telecommunications Group||Amazing growth story and well run company. High free float and strong insto support.||1,053.89||44.77||Telecommunication Services|
|NHF||NIB Holdings||Only listed health insurer. Widely held. Good performer.||1,049.22||21.99||Financials|
|GEM||G8 Education||Only listed childcare operator. Acquisition strategy paying off with stock delivering solid gains.||900.91||109.54||Consumer Discretionary|
|MMS||McMillan Shakespeare||One of the best performers since the GFC, but ongoing risk of change to FBT rules will hang over the company.||836.90||-15.21||Industrials|
|ARP||ARB Corp||Well covered but good candidate for core holding due to quality management.||822.66||7.14||Consumer Discretionary|
|AAD||Ardent Leisure Group||Widely held stock. Earnings more defensive than anticipated. Good yield. Potential core holding.||789.86||43.65||Consumer Discretionary|
|MRM||Mermaid Marine Australia||Its strategically located facility on WA coast gives it a key advantage over competition in servicing Gorgon & Pluto projects.||703.77||-8.39||Industrials|
|BGA||Bega Cheese||Corporate interest in Australian food companies makes the cheese maker worth following.||676.88||140.5||Consumer Staples|
|AUB||Austbrokers Holdings||The insurance broker is a strong performer. Widely held and well liked by small cap investors.||673.33||38.09||Financials|
|SRX||Sirtex Medical||A shining star in the biotech space and one of the best performing stocks in 2012. Great product (liver cancer treatment) and bright outlook.||625.61||-11.66||Health Care|
|RFG||Retail Food Group||Owns a number of well know franchise brands. Widely followed by instos.||607.93||50.91||Consumer Discretionary|
|BDR||Beadell Resources||Will be a very big FY14 for miner as it has to prove it aims to produce 200,000 ounces of gold a year.||597.00||-26.34||Materials|
|SGN||STW Communications Group||One of few companies able to benefit from online shift. Widely held and good insto support.||589.59||41.59||Consumer Discretionary|
|CWP||Cedar Woods Properties||Property developer with good ROE and earnings growth track record.||516.87||61.88||Financials|
|AMM||Amcom Telecommunications||Well covered junior telco but good candidate for core holding.||509.90||53.32||Telecommunication Services|
|SEA||Sundance Energy Australia||Analysts have a favourable take on the oil & gas explorer, but stock is still under radar of most. Sundance provides exposure to prospective Eagle Ford shale.||468.96||25||Energy|
|TGR||Tassal Group||Salmon farmer is finally turning a corner with an improved harvest strategy and growing demand for product.||458.57||133.32||Consumer Staples|
|TOX||Tox Free Solutions||Widely held stock in the waste solutions business. Its unique because it operates in a defensive-growth niche.||441.03||15.55||Industrials|
|RCR||RCR Tomlinson||Good first half FY13 result and outlook, but will its fortunes change this year with the mining capex slowdown?||434.70||80.04||Industrials|
|BRU||Buru Energy||Substantial size but not often covered by press. Widely held with good insto support.||429.69||-41.7||Energy|
|MYS||MyState||Well regarded and could make good alternative to bank stocks. Has good yield and earnings growth over past few years.||409.73||41||Financials|
|CCP||Credit Corp Group||Strong price run attracted good investor interest. Leveraged to any rise in loan defaults. Not well covered by press.||399.04||11.55||Industrials|
|NXT||NEXTDC||The cloud computing company is an IT sector darling. Fairly widely held and followed.||392.96||5.26||Telecommunication Services|
|MYX||Mayne Pharma Group||Sizeable generic drug maker with interesting board members.||377.52||109.38||Health Care|
|HZN||Horizon Oil||One of better regarded small energy stocks that doesn't receive much media attention.||377.33||-32.42||Energy|
|ACR||Acrux||One of the most successful Australian biotechs in recent history. Widely held by instos.||373.01||-15.97||Health Care|
|SLX||Silex Systems||Its uranium enrichment technology could become one of Australia's best innovations given its potential to change the nuclear power industry.||371.25||-24.83||Information Technology|
|IPP||iProperty Group||Worth watching as it is trying to be the REA Group of Asia.||341.03||126.51||Information Technology|
|MOC||Mortgage Choice||Has a good track record and is leveraged to any housing recovery. The stock is also liquid with good insto support.||335.44||68.96||Financials|
|CCV||Cash Converters International||Strong performance is attracting investors. It's Australia's only listed pawn shop and pay day lender.||332.52||-29.37||Consumer Discretionary|
|UXC||UXC||Company has turned corner and enjoyed re-rating. What's next?||330.17||2.19||Information Technology|
|NWH||NRW Holdings||One of the better regarded mining & civil contractors with good track record in delivering on projects.||326.30||-24.4||Industrials|
|TGA||Thorn Group||One of few retail stocks that is performing well despite its flat outlook for FY14. The Radio Rentals chain owner is also well supported by instos.||321.62||10.76||Consumer Discretionary|
|AEU||Australian Education Trust||Well performing childcare centre property owner. Good yield story and outlook.||312.73||31.43||Financials|
|BNO||Bionomics||One of the larger cancer treatment developers in this market.||288.54||101.18||Health Care|
|GXL||Greencross||Acquisitive veterinary group. Good profit growth and share price performance, but gets little press.||280.73||133.22||Health Care|
|GID||GI Dynamics Inc||Largely forgotten by investors but could attract attention this year as it looks to gain US approval to use its intestinal liner on diabetics.||276.88||29.09||Health Care|
|RKN||Reckon||Fierce competition for cloud base accounting software puts it in firing line.||275.42||-4.22||Information Technology|
|IMF||Bentham IMF||Litigation funder is unique stock. Stock not liquid but its outlook appears promising given the number of potential class action lawsuits.||268.51||8.44||Financials|
|VOC||Vocus Communications||Telecom stocks are in favour but Vocus is one of the least covered||265.76||106.59||Telecommunication Services|
|SHV||Select Harvests||Noteworthy for turbulent past and exposure to soft commodity market.||263.06||236.54||Consumer Staples|
|TFC||TFS Corp||The sandalwood products company offers exposure to both the agri and cosmetics industry. It will start commercial harvest this year.||258.17||102.27||Materials|
|RIC||Ridley Corp||High corporate interest in the sector and the shrinking pool of agri listed stocks make Ridley worth following.||247.79||-21.03||Consumer Staples|
|AJA||Astro Japan Property Group||Strong leverage to Japanese economy makes this an interesting stock to watch.||233.90||20.52||Financials|
|TGS||Tiger Resources||Future lies in its Kipoi copper mine expansion in the Congo but miner is fully funded with DRC govt holding 40% stake in tenement. Next 12mths will be interesting.||231.31||-4.03||Materials|
|NWT||Newsat||Potential large cap if it can launch its own satellite in 2015.||227.71||#N/A N/A||Telecommunication Services|
|NAN||Nanosonics||A successful medical tech story. Should be close to turning in maiden profit with its disinfection device.||227.60||73||Health Care|
|CLH||Collection House||In similar space as Credit Corp. Strong stock performance has attracted a following and the stock appears to be well placed to run further||223.76||79.24||Industrials|
|SPL||Starpharma Holdings||Noteworthy for its good pipeline of innovations. Well run, widely followed.||222.00||-33.33||Health Care|
|MXI||MaxiTRANS Industries||Transport equipment maker posted good interim result. Has appealing yield and growth.||218.95||22.06||Industrials|
|WBB||Wide Bay Australia||The building society is trying to turn its fortunes around. Also worth watching for its exposure to Queensland housing market, particularly around major resource projects.||209.10||0.72||Financials|
|PFL||Patties Foods||Illiquid stock but has suite of well recognised consumer brands. Defensive yield.||190.63||-4.05||Consumer Staples|
|RCG||RCG Corp||The footwear retailer is one of the best performing consumer stocks as online competition is not a big threat. Company has a good yield as well.||188.86||79.14||Consumer Discretionary|
|IFM||Infomedia||Interesting tech play in the car parts market. Strong share price gain but gets little air play.||179.16||51.69||Information Technology|
|HSN||Hansen Technologies||Operates in a high potential/growth industry but is not covered by press or brokers.||177.43||35.94||Information Technology|
|ESV||Eservglobal||Mobile money transfer company that has been gaining traction. Widely held by instos but low press coverage||175.58||80.77||Information Technology|
|ACL||Alchemia||One of the few biotechs with revenue stream. Good pipeline of oncology treatments.||175.18||-1.82||Health Care|
|DWS||DWS||Will be a big beneficiary if governments start spending on IT again.||172.73||-8.41||Information Technology|
|CKF||Collins Foods||One of the few food franchise listed companies.||172.28||54.05||Consumer Discretionary|
|SFH||Specialty Fashion Group||In early stages of turnaround. Can the women's apparel retailer sustain the momentum?||172.05||45.54||Consumer Discretionary|
|DTL||Data#3||Well respected IT company that receives little press coverage.||160.90||-9.39||Information Technology|
|NEA||Nearmap||A stellar performer with an Interesting business that offers high quality aerial maps to companies & government.||159.77||900||Information Technology|
|SIV||Silver Chef||Strong jump in the share price of the equipment financing group has attracted a good following.||148.72||-3.79||Industrials|
|MLB||Melbourne IT||A perennial underperformer could be interesting turnaround story as management is in midst of restructuring the business.||145.95||15.87||Information Technology|
|MCP||McPherson's||The personal care and household products supplier had been relatively insulated from volatile discretionary spend and online threat, but its latest profit warning shows it's not immune.||140.05||-14.51||Consumer Discretionary|
|AZZ||Antares Energy||Liquid with good insto support. Already in production with exploration upside in Texas.||133.88||0||Energy|
|BGL||BigAir Group||The wireless small cap has gained strong following over past year or two but is often overlooked by investors and the press.||133.35||32.57||Telecommunication Services|
|GHC||Generation Healthcare REIT||One of the more interesting REITs. Income is more defensive than typical property stock and its greenfield expansion gives it earnings growth potential.||133.06||30.01||Financials|
|WDS||WDS||Widely held with strong insto support. Engineering contractor diversified across mining, energy and infrastructure.||124.48||102.35||Industrials|
|POH||Phosphagenics||Sizable biotech with a game changing FY14 year ahead. Good insto following but questions of poor audit and governance standard could dog company.||112.25||-21.43||Health Care|
|SAR||Saracen Mineral Holdings||Emerging gold producer that is widely held by instos. Hitting milestones and looks cheap. Key asset is close to gold majors, which makes it a potential takeover target.||111.61||-54.27||Materials|
|MNW||Mint Wireless||Huge market potential if the mobile card payment solutions provider can gain market traction. Management aiming for $1 billion in transaction value a year.||111.06||1517.65||Information Technology|
|AMA||AMA Group||Good turnaround story but under the automotive services group is radar of most.||110.30||-10.37||Consumer Discretionary|
|REX||Regional Express Holdings||Well run airline that is overshadowed by Virgin and Qantas.||98.59||-20.09||Industrials|
|IMD||Imdex||Drilling company is well supported by instos and should benefit from any rebound in exploration activity.||97.87||-69.24||Materials|
|LCM||LogiCamms||Strong price performance and reasonable valuation attracting interest.||97.51||35.68||Industrials|
|RUL||RungePincockMinarco||IT company to resource industry. Facing tough operating climate with new CEO trying to restructure and turnaround company.||94.00||20.91||Industrials|
|JIN||Jumbo Interactive||Innovative small cap facing off industry dominated by giants. Worth watching to see if it can carve out a profitable global business.||88.38||-17.81||Consumer Discretionary|
|CLV||Clover Corp||One of the star performers in 2012. Operates in growing but relatively stable niche.||84.24||-1||Health Care|
|UBI||Universal Biosensors Inc||Well regarded biotech and one of few that's successfully manufacturing in Australia. Struck deal with a few global medical companies.||83.09||-47.8||Health Care|
|DRM||Doray Minerals||Widely held by instos. One of the more favoured gold explorers by brokers.||82.99||-25.48||Materials|
|AOH||Altona Mining||Noteworthy copper play with Xstrata pull-out of Roseby project in Australia and the good ramp up of its Finnish project.||78.50||-42.16||Materials|
|EML||Emerchants||Trying to change way corporates and governments disburse cash with its trackable and controllable debit card offering. If company can get $1 billion in loaded value on cards, the stock will surge.||74.80||252.94||Financials|
|YTC||YTC Resources||Next 12-mths will be eventful after YTC secured funding for its projects from Glencore.||73.72||-29.69||Materials|
|CKL||Colorpak||The small cap packaging company has grown via acquisitions over past few years.||72.57||62.19||Materials|
|LGD||Legend Corp||Electronic parts supplier to utilities and other industries. Stable earnings with good yield. Often overlooked.||72.44||13.89||Information Technology|
|CAA||Capral||An aluminium manufacturer that is actually holding up relatively well given that manufacturing is on the nose.||70.99||-6.25||Materials|
|TAN||Tandou||The only direct equity exposure to cotton prices. Also trades water rights and receives little press.||68.72||16.72||Consumer Staples|
|PEN||Peninsula Energy||Widely held by instos and large free float. It's the only uranium miner on the list.||65.48||-47.56||Energy|
|TSM||ThinkSmart||Potential turnaround story worth keeping eye on.||58.43||105.71||Financials|
|BOL||Boom Logistics||Crane hire group is riding out the downturn in construction. It's widely held by instos and is very liquid.||56.98||-54.72||Industrials|
|KOV||Korvest||The construction products and services supplier has been hit by project delays and deferrals. But its relatively high yield could give it some support.||54.92||-2.24||Industrials|
|FGE||Forge Group||Good track record has been marred by a recent shock downgrade and capital raising. How long will it take to redeem itself?||52.35||-86.43||Industrials|
|OTH||Onthehouse Holdings||Alternative small cap to online property leader REA Group. It is trying to use more timely housing data as a competitive edge against REA.||46.84||-16.18||Consumer Discretionary|
|GXY||Galaxy Resources||Good upside potential if it can get its problem-prone Jiangsu plant back on track. Won't be easy to right this ship.||45.19||-83.68||Materials|
|EBT||eBet||Potential alternative to star performer Ainsworth Tech. Has exclusive deal with US poker machine maker WMS.||41.53||167.02||Consumer Discretionary|
|NTC||NetComm Wireless||Under appreciated small IT hardware maker that is punching above its weight. Hardly covered by press.||39.25||69.44||Information Technology|
|CUV||Clinuvel Pharmaceuticals||Interesting skin disorder treatment developer that has done reasonably well over past year||38.22||-46.09||Health Care|
|UML||Unity Mining||Growing Tassie gold producer with high free float. Valuation looks compelling too.||32.29||-64.62||Materials|
|PGC||Paragon Care||Emerging hospital equipment supplier that has been ignored by market.||20.97||88.43||Health Care|
|Source: Eureka Report, Bloomberg|