Welcome to the beauty parade. This is the period after reporting season when companies embark on road shows to impress institutional investors.
Looking at a company’s share price can give you hints on who’s strutting the right stuff in front of the judges, and it seems NetComm Wireless (NTC) and Tandou (TAN) are coming out ahead in the beauty contest.
Wireless device maker NetComm jumped 23% in the last three sessions on high volume to a 4½-year high of 45 cents on no news while agriculture company Tandou rallied 8% over the same period to retest its near three year record of 50 cents.
I highlighted the upside potential for NetComm in early February and the market seems to be coming around to its growth potential in the machine-to-machine (M2M) space.
Management is flashing a chart during presentations showing the projected number of “connected devices” surging to 50 billion in 10 years compared with the current estimate of around 8 billion devices.
M2M refers to smart devices that can communicate with other equipment, and everyday examples include smart power meters and contactless payment or credit cards.
NetComm is well positioned to be a global player in this field as it has signed supply deals with Vodafone and Verizon Wireless.
Management reiterated its full year guidance with 2013-14 revenue expected to surge around 45% to between $58 million and $63 million.
Meanwhile, the worsening drought in Queensland that is now engulfing 80% of the state is working in Tandou’s favour. The lack of water in Queensland and parts of New South Wales has already forced up cotton seed prices and bolstered Tandou’s first half earnings with revenue from its farming operations hitting $36.3 million – or around $2.3 million more than what it delivered for the whole of 2012-13.
Tandou is one of the nation’s biggest cotton growers and most of its farms are located in Victoria and NSW. Its cotton crop is expected to grow significantly as its total cotton area has grown by a quarter in the current financial year to 8,700 hectares. Management is telling investors that this will grow again to 11,000 hectares in the next financial year.
What’s more, Tandou has pre-sold 85% of this year’s cotton crop at an average price of $476 a bale compared with $456 per bale in the last financial year. The price is expected to head higher with the current price fetching close to $500 a bale.
The company also trades water rights and this helps Tandou generate relatively consistent earnings as it profits from the trading of water in a drought.
Management didn’t give a guidance but said it continues to look at driving down costs so that it can produce more bales with the same overhead cost structure.