Seeing two industries that are developing interesting stories presently, energy and gaming, I wanted to choose a company from each that have good growth prospects and are attracting investors' attention from big gains in earnings. These two fit the bill and you should know why.
Drillsearch Energy Limited (ASX: DLS) ($1.51) is an energy producer based in the Cooper-Eromanga Basin region in SA and QLD. It announced that it had achieved record quarterly production in the December quarter of 910,000 barrels of oil equivalent (boe). Total sales got a boost from higher realised prices, making a 28% increase to $111 million.
Within the quarter, its cash position went from $25.2 million to $78.3 million with no increase in borrowings. Additionally, the company repaid $10 million drawn from a bank facility with the extra funds from the quarter.
The real kicker is the forecast guidance for FY2014 that has been upgraded to be around 3 million – 3.3 million boe, almost triple the approximately 1 million boe achieved in 2012-2013. The expected expansion is due to wells in its Western Flack oil fields producing much more than originally projected, and its increased share of oil coming from a transaction it has with Santos Limited (ASX: STO) in the Eastern Margin.
Apart from its conventional oil production, it is also working on developing unconventional resources in the Cooper Basin with BG Group, who want more gas for its LNG projects in QLD.
The company has several strong growth stories, and just at the time when the energy sector will be expanding to take part in the LNG export business set to begin in 2014-2015.
The gaming machine manufacturer Aristocrat Leisure Limited (ASX: ALL) ($4.68) is coming off a strong 2013 when it more than doubled NPAT to $107.2 million.
In addition to its regular business of gaming machines and software platforms, it has expanded into the social gaming sphere by acquiring Product Madness, which is one of the top five operators of free-to-play social casino slot games on Facebook Inc (NASDAQ: FB). Building up a presence in this new media is what it takes to stay up with your customers who may access your services from many different platforms.
Casino development in the Asia region will be moving forward with new gambling venues starting in the Philippines, Vietnam and South Korea. Aristocrat controls the largest market share of the gaming machines industry in the Asia region, so just as Macau was beginning to slow down with new casinos, Aristocrat will have new business opportunities.
Its Australian competitor Ainsworth Game Technology Limited (ASX: AGI) will also vie to have its machines and software management platforms installed in new casinos, so investors should watch it also, and see if Aristocrat can hold onto its market share.
Foolish takeaway
Following the demand within industries is a simple way to identify promising companies. When you need some inspiration on where to look for your next stock pick, keep your perspective wide, and see where the flow of business and investment is going. Once you have a general idea of what industries have the market momentum behind them, then you can home in on leading companies in the industry group.
