1. Harris Technology Group Limited (Recommendation: Speculative Buy, Market Cap: $33.14Mn)

Decent Performance in H1FY21: Harris Technology Group Limited (ASX: HT8) owns and operates one of Australia’s leading online IT and consumer electronics businesses. HT8 is a well-known brand with 30+ years’ history in the IT/CE (Information technology and consumer electronics) retail market, covering a wide range of IT products for small and medium businesses in Australia.

• For the half-year ended 31 December 2020, the company reported revenue from continuing operations of $19.39 million, representing an increase of 365% from the previous corresponding period (pcp). Further, the company reported a net profit from continuing operations of $1.06 million, up by 741% from the previous corresponding period. In August 2020, the company undertook a Private Placement and SPP to raise $4.9 million to fast-track growth.
• Cash and Debt Scenario: At the end of H1FY21, the company had cash equivalents of $2.2 million. Further, the company had a debt of around $8.19 million, comprising trade and other payables of $4.25 million, financial liabilities (current and non-current) of $3.71 million, and lease liabilities of $2.23 million. For FY20, the company’s current ratio stood at 1.19x, higher than 0.51x in FY19.
• Outlook: With a decent cash balance of $2.2 million, HT8 is well-positioned to take advantage of the retail “online revolution”. Currently, the company is focused on the expansion of its platforms and product lines, and it has already partnered with additional marketplace platforms due to its success on Amazon and its extensive range of IT/CE product coverage. HT8 intends to capitalise on future growth areas as they arise with limited to no additional cost.

Key Financials:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 18.74% and is currently trading below the average of its 52-week trading range $0.014-$0.225, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.105 and a resistance of ~$0.155.
• On a TTM basis, the stock is trading at an EV/Sales multiple of 2.6x, lower than the industry median of 6.5x.
• The company will continue to capitalise on future growth areas as they arise with limited to no additional cost.
• Key Risk: Foreign Currency Risk, Technology Disruption, COVID-19 Uncertainties
• Considering the company’s decent performance in H1FY21, increased cash balance, partnership with additional marketplace platforms, current trading levels, and Valuation on TTM basis, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.135, up by 3.846% as on 26 February 2021.

 

2. Angel Seafood Holdings Ltd (Recommendation: Speculative Buy, Market Cap: $24.11Mn)

Decent Growth in Sales: Angel Seafood Holdings Ltd (ASX: AS1) is a premium, innovative and organically certified producer of Coffin Bay Oysters. The company is mainly involved in selling oysters to the domestic market.

• During the six months ended 31 December 2020, the company reported record half-year sales with 5.1 million oysters sold, up 55% on pcp. This was driven by the continued success of Angel’s multi-bay strategy and decent momentum in retail sales. Over the period, the company witnessed a 20% reduction in operating costs (volume adjusted) achieved through benefits of scale and productivity gains. The company’s EBITDA grew 39% to $1.4 million, and profit after tax was up 74% to $0.7 million. In December 2020, the company undertook a $4 million Placement to accelerate its growth plans.
• Cash and Debt Scenario: As at 31 December 2020, the company had liquidity (cash and available facilities) of $5.2 million, significantly higher than $1.9 million as at 30 June 2020. The company’s total borrowing (short and long-term) stood at $7.32 million as at 31 December 2020. Current ratio for FY20 stood at 1.86x, higher than 1.30x in FY19. Debt to equity multiple for FY20 stood at 0.62x.
• Outlook: The company is currently well funded to accelerate its growth plans. AS1 expects the 2021 sales season to commence around March and anticipates a sound supply of oyster sizes available to cater for restaurant and retail demand. Looking ahead, the company is focused on expanding its scale through the acquisition of water leases, increasing productivity and profitability through innovation and improving price per oyster through premium brand positioning.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 19.44% and is trading lower than the average 52-weeks price level band of $0.090 and $0.275, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.112 and a resistance of ~$0.169.
• Looking ahead, the company is focused on progressing its growth strategy towards doubling production and improving profitability. The company has acquired additional water leases and launched a number of innovative farming methods to improve farming efficiencies. With decent liquidity of $5.2 million as at 31 December 2020, the company is well funded to accelerate its growth plans.
• Key Risks: Variations in spat supply, Governmental regulation, COVID-19 Uncertainties
• Considering the continuing growth in oyster’s sales, the company’s continued focus on improving operations and profitability, anticipated supply in 2021 sales season, and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.145, down by 6.452% as on 26 February 2021.

 

3. Holista Colltech Limited (Recommendation: Speculative Buy, Market Cap: $18.72Mn)

Decent Performance by Healthy Food Ingredients Division: Holista Colltech Limited (ASX: HCT) is a natural wellness company focused on delivering first-class natural ingredients, wellness product.

• During FY20, the company reported group revenue of $7.1 million, down by 2.1% on FY19, weakness in parts of its business due to the impact of COVID-19 was offset by strong growth in other divisions. Holista’s Healthy Food Ingredients division reported sales growth of 525% to just over $1 million in 2020, due to orders from Kawan Food Berhad and expansion into the North American market with Costanzo’s Bakery, Inc. The company’s Infection Control Solutions business achieved sales of $665,000 in FY20. For FY20, HCT posted an adjusted pre-tax net loss of $2.3 million.
• Cash and Debt Scenario: As at 31 December 2020, the company had cash and cash equivalent of $2.725 million, up from $101.4k as at 31 December 2019. The company ended FY20 with a debt of $0.94 million, comprising total borrowing (current and non-current) of $0.83 million and lease liability (Current and non-current) of $0.11 million.
• Outlook: Looking ahead, the company expects the demand for its all-natural sanitisers to grow further as it plans to launch sanitising nasal balm and M3 industrial solution. The company expect strong momentum achieved by the Healthy Food Ingredients business to continue as Costanzo plans to launch a range of Low-GI white bread products using Holista’s technology across North America in March 2021.

A Pictorial Presentation of Key Metrics:

SWOT Analysis:

Stock Recommendation:

• Over the last six months, the stock has provided a return of 13.11% and is trading lower than the average 52-weeks price level band of $0.055 and $0.275, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.052 and a resistance of ~$0.095.
• On a TTM basis, the stock is trading at a price to book value multiple of 3.0x, lower than the industry median of 4.9x.
• The company expect to realise multiple growth opportunities in 2021. The upcoming launch of GI Lite™ white bread through Costanzo’s US partnership is expected to be a significant growth driver for the business.
• Key Risks: Stiff Competition, COVID-19 Uncertainties, Supply Chain Disruption
• Considering the decent sales momentum in the company’s Healthy Food Ingredients division, resilient performance in FY20, the upcoming launch of GI Lite™ white bread, and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.069, up by 1.470%, as on 26 February 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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