1. Sky Network Television Limited (Recommendation: Speculative Buy, Market Cap: ~$261.94 Mn)

Strong Start to FY21: Sky Network Television Limited (ASX: SKT) is a leading digital multi-media business that provides sport and entertainment media services in New Zealand and overseas.

• For FY20, the company reported total revenue of NZ$747.6 million, down by 7% on the previous year. Operating profit before impairment stood at NZ$44.9 million and loss after tax stood at NZ$156.8 million including non-cash impairment of goodwill of NZ$177.5 million. During the year, the company achieved subscriber growth, both organically and through acquisitions that have created further positive momentum across the business. In the first four months of FY21, the company has witnessed better than expected growth in its direct satellite customer base and tight cost control. SKT has delivered six consecutive months of growth in direct satellite customers, driven by an improvement in Financial Year 2021 year-to-date annualised churn to 12.2%. SKT recently announced a new multi-year deal with Discovery to bring thousands of hours of premium factual and lifestyle shows to Sky customer.
• Debt and Cash scenario: As at 30 June 2020, the company’s total debt excluding lease liabilities stood at NZ$102 million, lower than the debt of NZ$191 million in FY19. At the end of FY20, the company had cash reserves of NZ$111 million.
• Outlook: Looking ahead, SKC’s earnings are expected to benefit from one-off cost savings as a result of the renegotiation of certain content rights, which continue to be impacted by COVID-19 restrictions. SKC is also continuing to exercise careful cost control measures across its operations. SKT has increased its FY21 revenue guidance to NZ$680m-NZ$710m, from the previous guidance of NZ$660 mn-NZ$700 mn.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation

• Over the last three months, the stock has provided a return of 15.28% and is currently inclined towards its 52-week low price of $0.103, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.123 and resistance of ~$0.160.
• On a TTM basis, the stock is trading at a price to book value multiple of 0.7x, lower than the industry median (Media & Publishing) of 1.2x.
• On the back of the improved revenue outlook and tight cost control, SKT has increased its EBITDA guidance range from NZ$125m-NZ$140m to NZ$140m-NZ$155m for FY21.
• Key Risks: Foreign Exchange Risk, High Competition, COVID-19 Uncertainties
• Considering the continued growth in direct satellite customer base, tight cost control, improved revenue and EBITDA guidance for FY21, recently announced deal with Discovery, and current trading level, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.150 on 22 January 2021.

 

2. MMA Offshore Limited (Recommendation: Speculative Buy, Market Cap: ~$129.35 Million)

Decent Growth in Revenue and Underlying EBITDA: MMA Offshore Limited (ASX: MRM) is a leading marine service provider in the Asia Pacific region, specialised in providing high-specification vessels and a comprehensive suite of marine and subsea services to the offshore energy and wider maritime industries.

• For FY20, the company reported revenue of $273.0 million, up 14.1% on the prior year. Further, it reported underlying EBITDA of $48.9 million (inclusive of $6.0 million AASB16 benefit), up 76% on the prior year. Reported net loss for FY20 stood at $94.2 million. MRM recently secured two new contracts for its Multi-Purpose Support Vessel the “MMA Privilege”, increasing the company’s contracted revenue for FY21 and FY22 by an aggregate total of approximately A$8.0 million. In December 2020, the company completed an equity raising of $80 million to prepay and repay existing debt.
• Cash and Debt Scenario: Following the successful completion of the equity raising and debt restructuring, the company’s pro forma net debt as at 30 September 2020 is reduced to $86.5 million. This included cash and cash equivalent of $86.7 million and gross debt of $173.2 million. Debt to Equity multiple for FY20 stood at 0.62x in FY20, lower than 1.23x in FY19.
• Outlook: Looking ahead, the company intends to leverage its marine skills to expand into adjacent marine sectors such as Offshore Wind, Government Services and Infrastructure. Recent equity raising and restructured debt facilities will strengthen the balance sheet and position MRM to execute its strategy. Based on the company’s forward order book and contract positions, the company expects its FY21 operating EBITDA to be in the range of $30 million -$35 million.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation

• Over the last one month, the stock has corrected by 19.40% and is currently inclined towards its 52-weeks low price of $0.023, offering a decent opportunity for accumulation.
• On the technical analysis front, the stock has a support level of ~$0.027 and resistance of ~$0.47.
• The company is targeting to return to stronger and more diversified revenue growth in FY2022 and beyond.
• Key Risks: Risk of Oversupply of Vessels and Subsea Services, High competition, COVID-19 Uncertainties
• Considering the company’s recently secured contracts, equity raising and debt restructuring, decent underlying performance in FY20, and current trading level, we give a “Speculative Buy” recommendation to the stock at the current market price of $0.036 on 22 January 2021.

 

3. AD1 Holdings Limited (Recommendation: Speculative Buy, Market Cap: ~$28.40 Mn)

Rise in Cash Receipts: AD1 Holdings Limited (ASX: AD1) is a provider of recruitment technology and mentoring platforms, utilities software billing services and management platforms, and related services.

• For Q1FY21, the company reported cash receipts of $864k, representing an increase of 37% compared to the prior year. During the quarter, the company extended its Managed Services Agreement with the Victorian Government for up to three years and signed new multi-year contracts with Powerclub and 3P Energy. In October 2020, AD1 completed the acquisition of SaaS business, Art of Mentoring (AoM). In order to complete the Art of Mentoring acquisition, the company successfully completed a placement of $2.5 million.

• Debt Scenario: As at 30 June 2020, the company had total debt of $0.13 million. The debt to equity multiple for FY20 stood at 0.09x, lower than the industry median of 1.07x.

• Outlook: As per the update provided on 6 January 2021, AoM has maintained 100% renewal rate since the start of FY21 and its revenue for YTD FY21 is up approximately 80% compared to the same period in the prior year. As a result of the company’s improved operating performance and the recent capital raise, AD1 is currently sufficiently capitalised to complete the integration of Art of Mentoring and to canvas future acquisition opportunities. 

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by 29.23%.
• The stock is trading higher than the average 52-weeks price level band of $0.008 and $0.076.
• On the technical analysis front, the stock has a support level of ~$0.038 and resistance of ~$0.056.
• The acquisition of AoM adds a diversified revenue stream to the business, and it has great synergy with AD1 in both customer opportunities and technology.
• Considering the rise in the cash receipts during Q1FY21, anticipated benefits from the acquisition of AoM, expected growth in subscription revenue, we give a “Speculative Buy” rating to the stock at the closing price of $0.053, up by 12.765% as on 22 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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