1. Toys”R”Us ANZ Limited (Recommendation: Speculative Buy, Market Cap: ~$137.89 million)

Toys ‘R’ Us ANZ Limited (ASX: TOY), previously known as Funtastic Limited, operates as a retailer of toys, clothing and baby products in Australia.

November 2021 Result Highlights: Despite facing challenges of delivery delays and associated order backlogs, the company witnessed continued sales order volume growth over the month. Some of the key highlights of the month are as follows:

• Rise in Revenue: For November 2021, the company reported total invoiced sales revenue (unaudited) of $4.09 million, up 139% on pcp.
• Rise in Order Value: Average order value for the month stood at $121.10, up 30% on pcp.

FY21 Result Highlights: For the year ending 30 June 2021 (FY21), the company reported total revenue of $21.8 million and statutory loss after income tax of $5.1 million. One of the important highlights of FY21 was the completion of acquisition of Hobby Warehouse Group (HWG) which includes e-commerce businesses Hobby Warehouse, Toys“R”Us and Babies“R”Us and IT distributor Mittoni.

Cash and Debt Balance: As at 30 June 2021, the company had a cash balance of $17.3 million, up from $367k as at 30 June 2020. Further, the company had nil debt in its balance sheet.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: Looking ahead, the company is focused on increasing local and global marketing of Toys“R”Us to promote growth. The company intends to maintain disciplined deployment of capital to achieve 5% market share aspiration in toys, baby and hobby addressable markets in all licensed regions.

SWOT Analysis:

Stock Recommendation:

• Over the last one month, the stock has corrected by ~13.88%.
• The stock has a 52-week low and high price of $0.075 and $0.205, respectively.
• On TTM basis, the stock is trading at a price to book multiple of 2.5x, lower than the industry (consumer Cyclicals) averageof 4.4x.
• Key Risks: Supply Chain Disruption, COVID-19 Uncertainties, Competition Risk, etc.
• Considering the company’s improving revenue, rising orders, expected benefits from new warehouse facility, modest outlook, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing price of $0.150, down by 6.251% as on 14 January 2022.
  

TOY Weekly Technical Chart, Data Source: REFINITIV

2. Horizon Minerals Limited (Recommendation: Speculative Buy, Market Cap: ~$70.99 million)

Horizon Minerals Limited (ASX: HRZ) is a gold production, development, and exploration company with projects located in the heart of the West Australian goldfields.

Progressing 100% Ownership of Find Gold Project: On 20 December 2021, the company announced that it has entered into agreement with Labyrinth Resources Limited (ASX: LRL) to acquire the remaining 50% of the high-grade Penny’s Find gold project, which is located in West Australian goldfields. The settlement of the transaction is expected to occur in March 2022 quarter.

Completing Toll Milling Campaign: On 22 December 2021, the company notified regarding the completion of a further toll milling campaign at the Lakewood toll milling facility in Kalgoorlie – Boulder.

Improved FY21 Results: For the year ended 30 June 2021, the company reported total revenue of $23.3 million, up from $3.1 million in FY20, supported by the production at Boorara Gold Project. The company’s net profit after tax (NPAT) for FY21 stood at $2.44 million, up from $1.04 million, driven by the growth in revenue.

Cash and Debt Scenario: As at 30 June 2021, the company had cash and cash equivalents of $11.31 million, up from $5.89 million as at 30 June 2020. At the end of FY21, the company had lease liabilities of around $0.13 million. As at 30 September 2021, the company had cash balance of $8.68 million. Current ratio for FY21 stood at 13.72x, up from 1.58x in FY20.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: The company is looking forward to completing the second milling campaign at the Lakewood toll milling facility in Kalgoorlie in January 2022. The company’s recently acquired Cannon underground gold project has the potential to provide high-grade ore early in the production profile with significant growth potential down-plunge and along the Cannon shear zone. The company is focused on pursuing further value accretive consolidation opportunities.

SWOT Analysis:

Stock Recommendation:

• Over the last six months, the stock has corrected by ~1.99%.
• The stock has a 52-week high and low of $0.150 and $0.096, respectively.
• On a TTM basis, the stock is trading at a price to book multiple of 1.1x, lower than the industry (basic Materials) median of 2.7x, thus seems undervalued.
• Key Risks: Fluctuations in Gold Price, COVID-19 Uncertainties, Exploration-Related Risk, etc.
• Considering the decent exploration results, improved FY21 financial performance, expected benefits from the recently acquired Cannon underground gold project, valuation on TTM basis, and associated key risk, we give a “Speculative Buy” rating on the stock at the closing price of $0.125 as on 14 January 2022.

HRZ Daily Technical Chart, Data Source: REFINITIV

3. Buddy Technologies Ltd (Recommendation: Speculative Buy, Market Cap: ~$48.54 million)

Buddy Technologies Ltd (ASX: BUD) is an IoT and cloud-based technology company that operates two core businesses – Commercial Business and Consumer Business.

Q1FY22 Result Highlights:

• For the quarter ending 30 September 2021 (Q1FY22), the company reported customer revenues of A$6.3 million, down by 18% on pcp, mainly due to the shift in timing of Amazon Prime Day.
• For the quarter, the company reported positive net cashflow of $1.3 million and EBITDA of $14k.

November 2021 Trading Update: For November 2021, BUD reported a positive EBITDA of $221k, and net cash flow of $997k. During the month, the company delivered a gross margin of 42%.

Cash And Debt Scenario: As at 30 June 2021, the company had cash and cash equivalent of $2.09 million, slightly down from the cash of $2.5 million as at 30 June 2020. Further, the company had total debt (including borrowings and lease liabilities) of $27.5 million. During the September quarter, the company conducted a capital raising which yielded A$6.6 million of proceeds, of which A$6.3 million was spent on debt repayments. At the end of November 2021, the company had cash and cash equivalents of $2.3 million.

Current Ratio Trend (Source: Analysis by Kalkine Group)

Outlook: Amazon recently commenced the sale of the company’s LIFX Smart Switch which is a high gross margin product. In FY22, the company is focused on growing its markets around the world and manufacturing its products more cost efficiently. The company is actively working to maximise both its sell-in and sell-through across both its retail partners and its own online channels. The company will hold its Annual General Meeting on 28 January 2022.

SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock has corrected by ~43.99% and is trading lower than the average 52-week price level band of $0.010 and $0.065, offering a decent opportunity for accumulation.
• On a TTM basis, the stock is trading at a Price to Book multiple of 1.5x, lower than the industry (technology) median of 4.2x, thus seems undervalued.
• Key Risks: Foreign Currency Risk, COVID Uncertainties, Supply Chain Disruption, etc.
• Considering the decent performance in Q1FY22, improvement in FY21 bottom line, expected benefits from the launch of LIFX Smart Switch 2-Button Glass, current trading level, valuation on TTM basis, and key associated risks, we give a “Speculative Buy” rating on the stock at the current market price of $0.0135 as on 14 January 2021, 12:30 PM (GMT: GMT+10), Sydney, Eastern Australia.

BUD Daily Technical Chart, Data Source: REFINITIV

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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