Sunland Group Limited

SDG Details

A Sneak Peek at FY20’S Key Results: Sunland Group Limited (ASX: SDG) is one of the leading property development and construction companies with urban development, residential housing, and multi-story developments as its core segments. As on 23^rd October 2020, the market capitalisation of the company stood at ~$263.55 million. The company reported a decline in total revenue from $282.7 million in FY19 to $167.2 million in FY20. This was due to a fall in revenue from the sale of properties by 42% from $277.6 million in FY19 to $159.8 million in FY20. Also, other revenue from operations (interest income, holding income, investment property income) also declined in FY20. The underlying earnings excluding inventory adjustments for the Group stood at $16.4 million in FY20. The Group’s consolidated profit after tax stood at $2.4 million in FY20 as compared to $17.7 million in FY19. Its gearing ratio for the year stands at 33% debt to assets and 55% debt to equity both higher than FY19.

FY20 Financial Highlights (Source: Company Reports)

SGD’s Key Strategic Plan: On 20^th October 2020, the Directors of the company have proposed to sell certain inventory which is not currently under development and finish completing certain projects over the next 3 years or more. This move is intended to realize shareholders’ current net asset value to $2.56 per share for distributing dividend and capital payments in the future.

Outlook: Due to the pandemic crisis, the Group is cautious with the delivery of its portfolio. It has made strategic readjustments to the operational needs and administration finances aligned to the Group’s activity. The Group aims to specifically focus on the downsizers, first home buyers, and subsequent home buyers within the owner-occupier market. The management will carefully plough back profits in new acquisitions and await the right avenues to dispose of assets to unlock and realise the value of the balance sheet.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: For FY20, the board announced a special dividend of 3 cents per share and a final dividend of 10 cents per share, both fully franked. The Group’s cash and cash equivalents position stands at $13.1 million as on 30 June 30. The stock of SDG gave a positive return of 58.08% in the past one month and 79.10% in the past three months. The stock of SDG has an immediate support level of ~$1.834 and a resistance level of ~$2.167. We have valued the stock using the Price to Earnings based multiple based illustrative relative valuation method and have arrived at a target price with an upside of high single-digit (in % terms). Considering the current trading levels, key strategic plans, attractive returns in the past three months, and long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $2.150, up by 11.688% on 23^rd October 2020.

SDG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Xref Limited

XF1 Details 

Sales, Credit Usage Growing, Notable Clients Added in 1HFY21: Xref Limited (ASX: XF1) is a human resource technology firm, providing candidate referencing services through its cloud-based software. It provides fraud prevention, comparable metrics, data governance and customized reports. As on 23^rd October 2020, the market capitalization of the company stood at ~$38.23 million. The company has released quarterly results for Q1 FY21 resulting in a decrease of 3% in sales to $2.4 million from $2.45 million in Q1 FY20. The company reported $2.2 million revenue (credit usage), $2.5 million cash receipts and $2.4 sales (credits sold) for Q1 FY21 indicating an encouraging return to pre-COVID-19 levels. The company has reduced the cash outflows by 48% to $2.85 million in Q1FY21 versus $5.4 million in Q1FY20. The business is witnessing strong demand from both essential and non-essential services segments. In September 2020, the company bagged 4 key health care clients across the US, UAE, Australia, and New Zealand and added another 45 new clients over the next month.

The total revenue stood at $8.03 million in FY20 versus $8.048 million in FY19. The company had reported a loss after tax attributable to the owners amounting to $10.056 million in FY20 versus $8.181 million in FY19.

Q1FY21 Key Highlights (Source: Company Reports)

Outlook: The company has provided an expense forecast for Q2 FY21 at $2.9 million. It will also stop receiving Jobkeeper subsidy worth $440k from Q2 onwards due to the robust recovery during Q2. With further increase in credit usage and sales, it will continue to move towards cash flow break-even in 2HFY21.

Stock Recommendation: The company has cash on hand $7.1 million at the end of September 2020. The stock of XF1 gave positive returns of 65.51% in the past one month and 71.42% in the last three months. The stock is trading slightly below the average of its 52-week high and low trading range and thus retains the potential for  further growth. On a Technical front, the stock of XF1 has a support level of ~$0.19 and an immediate resistance level of ~$0.278. Considering the current trading levels, decent demand from both essential and non-essential services segments and current market conditions, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $0.24, up by 14.285% on 23^rd October 2020.

XF1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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