On Friday, the Structural Monitoring Systems Plc (ASX: SMN) share price shot up by 12% to $0.56 cents following an annual performance summary. The Structural Monitoring Systems share price has opened strongly again this morning, with shares up another 6.25% to 0.60 per share at the time of writing.

What were the results

The announcement by Structural Monitoring Systems included information about the unaudited financial performance of wholly owned subsidiary, AEM. It also included an update about the approval process underway for the company’s new technologies.

AEM’s full year 2020 normalised earnings before interest tax depreciation and amortisation were approximately $4.4 million. This represents a 24.6% increase on financial year 2019. 

Full year sales for the 2020 financial year were $18.96 million, which is a 10.7% increase on the 2019 financial year.

Structural Monitoring Systems, the parent entity, reported a cash balance of $2.113 million at the end of the financial year.

The announcement stated: “The 2020 revenue and profitability achieved by AEM is a remarkable accomplishment particularly in light of the unprecedented challenges present in the global aviation market together with the operating impact imposed by COVID-19 on holistic commercial platforms.”

Structural Monitoring Systems reported that AEM will continue to work on developing new generation product solutions that are primarily focused on rotorcraft markets, with R&D spending increasing from 10% of sales to 13% of sales. According to the announcement, AEM will continue to add to its pipeline of new products under development and will target several of the largest global original equipment manufacturers around the world.

The company reported that AEM’s sales for the first quarter of the new financial year were already strong and higher than the same time last year.

The company’s CVM technology, which involves sensors placed at strategic locations on an aircraft to detect cracks, moved closer to commercialisation with testing commencing in the coming month. This supervised testing will move the technology closer to gaining approval from the American Federal Aviation Administration.

Structural Monitoring Systems also reported that its 2ku wifi program, which allows flight passengers access to internet much faster than usual in flight internet speeds, is also on schedule toward gaining approval from the Federal Aviation Administration.

About the Structural Monitoring Systems share price

Structural Monitoring Systems develops and manufactures aviation-related technology that has seen demand from airlines around the world. Recent announcements suggest that the process of gaining government approval for the company’s new technologies has been tracking according to schedule.

The Structural Monitoring Systems share price is up 155% from its 52 week low of $0.235 cents, however, it is down 40% since the beginning of the year. The Structural Monitoring Systems share price is down 9.77% since this time last year.

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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Because I have a high tolerance for risk, I’m a big fan of investing in growth shares.

Luckily for me, there are a large number of companies listed on the Australian share market that have strong long-term growth prospects.

Two which I think are among the best on the local market right now are listed below. Here’s why I like them:

A2 Milk Company Ltd (ASX: A2M)

I think A2 Milk Company is one of the best growth shares on the local market. The leading dairy and infant formula company has been an impressive performer over the last few years thanks largely to the strong sales growth of its a2 Platinum infant formula. The main catalyst for this has been demand in China and from daigou shoppers in Australia.

The good news is that this strong demand doesn’t appear to be waning and a2 Milk Company’s market share in the lucrative market is still a reasonably modest 6.6%. I believe this gives it a long runway for growth over the coming years. And although the a2 Milk share price is trading at 35x estimated FY 2021 earnings, I feel this is a fair multiple given its very positive long term outlook.

ResMed Inc (ASX: RMD)

Another top growth share which I think investors ought to consider buying is ResMed. It is a sleep treatment-focused medical device company which has a portfolio of leading masks and software solutions treating obstructive sleep apnoea.

ResMed has consistently delivered solid earnings growth over the last decade and I expect this positive trend to continue for the foreseeable future. This is thanks to the expected growth of the sleep treatment market, strong demand for ventilators, and its investment in research and development. And while the ResMed share price has just hit an all-time high, I would still be a buyer of its shares if you’re planning to make a long term investment.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. The Motley Fool Australia has recommended ResMed Inc. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Earlier today I highlighted three shares on the S&P/ASX 200 Index (ASX: XJO) that have recently reached new highs.

While those ASX 200 shares have recovered strongly from the market selloff earlier this year, not all shares on the index have done so.

Two ASX 200 shares that are still trading notably lower than their 52-week highs are listed below. Are they in the buy zone?

Aristocrat Leisure Limited (ASX: ALL)

The Aristocrat Leisure share price is down over 30% from its 52-week high of $38.23. The gaming technology company’s shares have come under significant pressure this year after the pandemic forced the closure of casinos. This impacted land-based unit sales and revenues generated from its daily fee model. The good news is that the company’s Digital segment have helped cushion the blow. Thanks to lockdowns, closures, and the growing popularity of mobile gaming, Aristocrat’s digital operations have been thriving and generating significant recurring revenues.

For example, during the first half of FY 2020, group revenue increased 7% to $2.25 billion. This reflects a 6% decrease in Land-based revenues and 19% growth in Digital revenue. Given the favourable tailwinds, I’m confident there will be more of the same in the second half and beyond. Which should lead to stellar earnings growth once trading conditions return to normal for its Land-based operations. As a result, I think the weakness in the Aristocrat Leisure share price is a buying opportunity for long-term focused investors.

Flight Centre Travel Group Ltd (ASX: FLT)

The Flight Centre share price is down a whopping 77% from its 52-week high of $49.14. Investors have of course been selling the travel agent’s shares due to the negative impact the coronavirus pandemic is having on bookings. With travel markets coming to a standstill, Flight Centre was left generating next to no revenue and still had considerable operating costs to pay. This led to the company having to undertake a material capital raising (which diluted shareholders greatly) to give it sufficient liquidity to survive the crisis.

Positively, Flight Centre appears to have raised enough funds now to see it through the crisis. It has also cut its operating costs materially, which should mean it operates a leaner business when travel markets return to normal. However, I’m not convinced the company will be profitable for a little while to come. In light of this, I wouldn’t be in a rush to invest right now.

More reading

• Altium and 2 more ASX 200 shares to watch this week
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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My ASX share of the week is listed investment company (LIC) PM Capital Global Opportunities Fund Ltd (ASX: PGF).

The best performers over the last few months have been growth shares that are leveraged to the change in the way that people are now spending or living. Usually those strong performers have a strong digital presence. Some of the ASX shares that have performed really well have been Afterpay Ltd (ASX: APT), Temple & Webster Group Ltd (ASX: TPW) and Pushpay Holdings Ltd (ASX: PPH). I think it will be hard for them to perform as well over the next six months as the last six months.

It’s getting harder to find good value. The businesses that are doing well are priced highly and the rest face a lot of uncertainty over the next six months or longer.

But I think there are some ASX shares like LICs that look good value which are trading at an attractive discount to their net tangible assets (NTA).

You may be wondering what a LIC actually does. It’s pretty simple, it’s just a listed investment fund that invests in other shares on your behalf. I think globally-focused LICs are good investment ideas because ASX shares only represent 2% of the global share market. You may be missing out on exposure to good opportunities. 

Overview of ASX share PM Capital Global Opportunities Fund

It’s a LIC that invests in international shares. It’s run by PM Capital, an investment management business led by Paul Moore. The ASX share was listed in December 2013, though there has been an unlisted version of the fund operating since October 1998.

The LIC charges a management fee of 1% per annum of the portfolio and a performance fee of 15% of the investment return above the benchmark return. The benchmark is the Morgan Stanley Capital International World Index (AUD).

What shares does it invest in?

The ASX share can invest in any global share. It’s not restricted by country, industry sector or market capitalisation. It only invests in businesses that it has conviction in. It generally holds around 40 globally listed shares in its portfolio.

Each month the LIC discloses what percentage of its portfolio is invested in a particular theme or sector. At the end of May, 8% of the portfolio was invested in businesses related to housing Ireland and Spain, global domestic banking was a 24.4% weighting, service monopolies had a 14.8% allocation, Macau gaming was a 8.3% weighting, alternative investment managers had a 12.6% allocation, industrial European businesses had a 6.7% allocation, materials had a 11.4% weighting and ‘other’ had a 12% allocation.

The LIC can also short shares if it wants to. It had short positions amounting to 8.2% of the portfolio at the end of May 2020.

Some of the actual names it actually owns include: Cairn Homes, Bank of America, Visa, MGM China, KKR & Co, Siemens and Freeport-McMoRan Copper.

Why I think it’s good value

I think the ASX share represents good value. Many of the businesses that it’s invested in are somewhat cyclical, those shares have been punished more than others due to COVID-19. I’m not expecting rapid returns, but some of those holdings do look cheap. When investing in cyclical shares the best time to invest is during the bottom of a cycle.

PM Capital Global Opportunities Fund releases a weekly NTA update. At 26 June 2020 it had NTA before tax of $1.12 per share. This is an 18% discount to the current PM Capital Global Opportunities Fund share price of $0.92.

The large NTA discount also boost the potential dividend yield from the ASX share. Assuming it pays 4 cents per share over the next 12 months, it has a grossed-up dividend yield of 6.2%.

Foolish takeaway

I think that over the next 24 months, or less, the shares that the LIC owns could perform well as the global economy recovers to a new normal. I’d be very happy to buy some shares today for the long-term. Both for capital growth and dividends. 

More reading

• Do you have $1k to invest? Buy 1 of these ASX shares
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Tristan Harrison owns shares of PM Capital Global Opportunities Fund Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of PUSHPAY FPO NZX and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended PUSHPAY FPO NZX and Temple & Webster Group Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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On Friday, defence contractor Electro Optic Systems Holdings Limited (ASX: EOS) announced it had entered into negotiations with the Commonwealth Government. This arose out of the government’s $270 billion investment being made in the Australian Defence Force (ADF) announced last week. During his speech, the Prime Minister specifically referred to high technology sensors, which are at the core of Electro Optic’s product range.

The EOS share price jumped by 16.1% following Mr Morrison’s speech, then went into a trading halt at the close of business on Wednesday. It begins to trade again today.

Defence spending negotiations

Electro Optic Systems is in negotiations with the government over the sale of 251 remote weapon stations over the next 12 months as part of the defence spending initiative. The systems will be added to the Army’s Bushmaster and Hawkei protected mobility vehicles and allow for operation from a protected position. 

These negotiations represent welcome news for the company after the recent impacts of COVID-19 on its business. In late May, Electro Optic Systems reported delays of 6 months to $100 million of receipts due to delivery issues. In addition, the company advised it has deferred $70 million in revenue and expects margins to fall from 13.5% to 11%.

As yet, it is unclear precisely which products are included as part of the negotiations. The company makes a range of vehicle-mounted, remote weapon stations of varying size and capability. Furthermore, it supplies comprehensive drone defence technologies which are battle tested. 

About the company

The privatisation of Commonwealth of Australia space activity formed Electro Optic Systems in 1983. The core of the company is its sensor technology which it has commercialised in the aerospace, defence and communications industries.

The weapons systems mentioned above include this sensor technology. In addition, it has also been applied in the Space Situational Awareness (SSA) partnership with the United States. SSA monitors and tracks orbiting space-based objects such as satellites and debris using ground-based radar and optical stations.

Electro Optic Systems presently has active contracts with several NATO naval forces and the Royal Australian Navy. It is the global market leader in lightweight remote weapons systems. 

The company expects to meet its FY20 guidance announced in April, 2020 of 38% revenue growth to $230 million.

More reading

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Daryl Mather owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Electro Optic Systems Holdings Limited. The Motley Fool Australia has recommended Electro Optic Systems Holdings Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Mayne Pharma Group Ltd (ASX: MYX) share price will be one to watch on Monday following the release of a positive update by the pharmaceutical company.

What did Mayne Pharma announce?

This morning Mayne Pharma announced that it has entered into a long-term supply agreement with Novast Laboratories for 13 U.S. generic oral contraceptive products. This includes five new products not previously marketed by the company.

Novast Laboratories is a pharmaceutical company based in Nantong, China. It develops and commercialises generic drugs for global markets. Novast has a significant number of products approved by the U.S. Food and Drug Administration (FDA), including hormone products and sustained-release oral dosage forms.

According to the release, four of the additional products are FDA approved and include generic equivalents of two of the highest prescribed oral contraceptive products in the United States.

These are Ortho Cyclen and Ortho Tricyclen, as well as Loestrin 24 FE and Desogen. The fifth new product included in the agreement is still pending review with the FDA.

Mayne Pharma’s CEO, Scott Richards, commented: “We are very pleased to have partnered with Novast, who have an outstanding quality track record manufacturing and supplying oral contraceptives to the US market. This transaction expands our women’s health portfolio and secures supply on more favourable terms of eight products previously acquired from Teva Pharmaceuticals to continue to drive growth of our women’s health franchise.”

What is the market opportunity?

The company notes that, according to IQVIA, the annual U.S. market sales for the five additional products were US$500 million, with more than 1.3 billion tablets sold annually.

This agreement has given Mayne Pharma’s women’s health portfolio a major boost in respect to its market opportunity.

Mr Richards said: “Mayne Pharma’s women’s health portfolio today includes 27 marketed and pipeline products, including a novel oral contraceptive E4/DRSP and two generic contraceptive products targeting markets with sales of US$1.2 billion and targeted to launch in FY21.”

Finally, with the Mayne Pharma share price down 22% since the start of the year, shareholders will no doubt be hoping this is the catalyst to narrowing this decline and ultimately taking its shares higher for the year in the near future.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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