Finbar Group Limited

FRI Details

H1FY21 Results Performance: Finbar Group Limited (ASX: FRI) is the leading builder of the apartment in Western Australia and is engaged in building medium to high-density residential apartments and commercial properties. As of 21^st April 2021, the market capitalisation of the company stood at ~A$231.30 million.

The company has recorded a 23.3% YoY decline in revenue during the six months ended 31 December 2020 to $40.96 million due to sell down from the prior period. Further, total comprehensive income for the period reduced to $4.023 million which marks the company’s 25^th consecutive year of earnings. The company ended the period with a solid liquidity position with cash levels of $31.5 million. Further, the cash flow generation remained strong and the net cash generated from operating activities for the period stood at $11.84 million. Meanwhile, the Board has announced a dividend of 2.0 cents per share to be paid to the shareholders and the payable date for the same was 19^th March 2021.

Consolidated Interim Income Statement (Source: Company Reports)

Key Risks: The impact of Covid-19 poses a significant risk as it has resulted in a significant reduction in sales initially. Further, the company has exposure to market risks like changes in interest rates and equity prices which could adversely affect income or the value of its holdings of financial instruments. However, the management highlighted that the COVID situation is normalising in Western Australia and the economic growth is being driven by constant robust commodity prices.

Outlook: The company highlighted that it witnessed business sentiment improving into 2021, which is visible from the healthy $34.6 million in sales recorded in January 2021, a maximum level achieved since 2006. Historically, the sales of the industry in the January month used to remain muted. The positive sales conditions have resulted in pulling forward construction dates at its key projects. It is witnessing very strong and competitive buyer demand across its property portfolio owing to the sustained demand in the residential market. Meanwhile, FRI has started construction activities at its Civic Heart project in South Perth due to healthy acceleration in presales. It has also advanced the construction work at its AT238 project, while the Dianella project is likely to be completed in Q1FY22. Currently, the company has a robust project pipeline worth $469 million which is under construction. Apart from this, it has a development approval of $544 million and a further $335 million worth of unapproved pipeline.

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

After a volatile previous week with the stock closing at peak price, the ongoing week is proving to be a softer week with lower closing. The technical indicator RSI with a reading around 51 and a curve at the end pointing down, suggests the softening of bullish momentum for the stock.

Going forward, the stock may have resistance around the previous high of $0.900 whereas support could be around the lower Bollinger band of $0.813.

Stock Recommendation: The stock rose by ~18.8% in 6 months and ~24.08% in 9 months. It made a 52-week low and high of $0.600 and $0.960, respectively and the stock is trading towards the 52-week higher level.

Considering sustained robust demand momentum and a decent outlook, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.850 per share on 21^st April 2021.

FRI Daily Technical Chart (Source: Refinitiv (Thomson Reuters))

MyDeal.com.au Limited

MYD Details

H1FY21 Results Performance: MyDeal.com.au is an online retail marketplace in Australia that provides an array of products to its customers across furniture, home & garden, fashion, tools & equipment, electronics, and baby & kids. As of April 21, 2021, the market capitalisation of the company stood at ~A$229.06 million.

The company has posted solid growth in revenue during the half-year ended 31 December 2020, up 248% YoY to $21.2 million. The active Customer base rose at a solid pace of 205% YoY to reach a record 813,764. Further, it has witnessed a robust repeat business as is reflected from 52.7% of transactions in Q2FY21 was generated from returning customers. Additionally, the contribution from Private Label to gross sales was $4.3 million with healthy gross profit margins of ~43%. However, the group recorded a negative EBITDA of $1.4 million (adjusted EBITDA -$1.0 million) mainly due to higher investment in advertising and promotional activity to drive the customer acquisition strategy and the expansion of its private-label range.

Consolidated Interim Income Statement (Source: Company Reports)

Listed on ASX: Following its successful $40 million worth IPO in October 2020, the company raised $35 million, while $5 million was issued to certain existing shareholders. The proceeds will help the company to accelerate its growth strategy.

Key Risks: While accelerated investment in marketing and advertising have dragged the earnings in H1FY21, the company expects further marketing and promotional investment in H2FY21, which will be a key measure to look out for. Further, the company is exposed to cybersecurity risks, loss of key personnel risk, the continued uncertainty about the continuation of the COVID-19 pandemic which may disrupt supply chains and resultantly the company’s performance.

Valuation Methodology: Price/Sales Multiple Based Relative Valuation (Illustrative)

Outlook: The balance sheet remains well capitalised with a healthy cash balance of $48.1 million at December 2020, following the completion of the successful IPO in 2020. Besides, the group is mulling at increasing the gross sales contribution from the private label driven by investment in inventory as well as augmenting its supplier base as it presents growth and margin expansion opportunities. The private label currently contributes 3.4%. It has also built sourcing relationships in Indonesia, Taiwan and Vietnam for the same. Additionally, the Company remains focused on customer acquisition during H2 FY21 in order to drive further growth.

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock had been in a downtrend with lower-high and lower-low. But, for the past 4-5 weeks, it has been consolidating around its low price of $0.860. The technical indicator RSI with a reading around 25 suggests that the stock is in the oversold zone thereby limiting the scope of further downside.

Going forward, the stock may have resistance around $1.000 whereas support could be around $0.844.

Stock Recommendation: The stock declined by ~35.99% in 3 months and ~6.38% in 1 month. It made 52-week low and high of $0.865 and $2.200, respectively and is trading closer to the 52-week lower levels, reflecting decent opportunity for accumulation. We have applied Price/Sales based relative valuation (on an illustrative basis) and the target price reflects the potential upside of high single-digit (in % terms).

We have applied a premium to Price/Sales Multiple (NTM) (Peer Average) considering its healthy balance sheet with strong cash position, sustained investment strategies in order to drive accelerated growth, expanding private label range and significant increase in active customers. For the purposes of valuation, we have taken peers like G.U.D. Holdings Ltd (ASX: GUD), Jumbo Interactive Ltd (ASX: JIN), among others.

Meanwhile, the company will continue to invest in technology as well as in innovation and it aims to launch iOS and Android apps expected in H2FY21. Moreover, the company anticipates additional marketing and promotional investment in H2FY21 in order to drive accelerated growth in the core platform and private label strategy.

Thus, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.880 per share, down by 0.565% on 21^st April 2021.

MYD Daily Technical Chart (Source: Refinitiv (Thomson Reuters))

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