Nutritional Growth Solutions Limited

NGS Details

A Sneak-Peak into NGS’s 1HFY20 Results: Nutritional Growth Solutions Limited (ASX: NGS) is an Israel based firm, engaged in the development, production, and distribution of protein supplements for children and has a wholly-owned subsidiary in the US. In September 2019, the firm merged with Nutriteen Professionals Limited, a related firm. As on 3^rd November 2020, the market capitalization of the company stood at ~$25.57 million. The company reported a 74.9% increase in revenue of $1.002 million in 1H20 versus $573k in 1H19 and a 13% increase in gross profit margin. The revenue in 1H20 increased due to the sales momentum gained in the US and higher brand recall. The revenue of the company stood at $1,184k in Dec’19 as compared to $524k in Dec’18. China and the US are the key markets for the company, and it has developed a growth pipeline for these markets for the next 18 months. NSG’s comprehensive loss for 1H20 amounted to $678k as compared to $1,101k in 1H19.

Income Statement 1H20 (Source: Company Reports)

NGS’s Listing on ASX as on 30^th October 2020: NGS got listed on ASX. It floated an IPO of 35 million fully paid ordinary shares at an issue price of $0.20 per share and raised $7 million. The offer was heavily oversubscribed from both the retail and institutional investors. The company aims to deploy the capital raised for sales and marketing programs in the US and China, for clinical testing and developing new products, and launching new products due to commercialization in the short to medium term. It plans to capture the opportunity available in the nutritional supplements market.

Outlook: The company has plans to add new products during 2020-2021, establish new channel partners such as retail stores, healthcare providers and e-commerce portals in China. It also aims to target new territories such as South Korea and Europe besides expansion in the US and China. Since the company has significant business development plans, it does not expect payment of dividends for the next 2 years. 

Stock Recommendation: The company’s cash and cash equivalents balance stood at $1,313k as of 30 June 2020. Net cash at the end of the period stood at $151k. Since listing, the stock has corrected by 8.06% (as on 3^rd November 2020) and is trading close to its 52-week low level of $0.260. On the technical analysis front, NGS has an immediate support level of ~$0.28 and a resistance level at ~$0.295.  Considering the company’s growth plans for the next 18 months, launch of new products and brands, new channels and increase in sales in the last 2 years along with key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.285, up by 5.555% on 3^rd November 2020.

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

Xplore Wealth Limited

XPL Details

Revenue, Net Inflows and Funds Under Administration (FUA) Increased in FY20: Xplore Wealth Limited (ASX: XPL) offers investment administration services and technology solutions to the wealth management industry. It offers managed discretionary accounts to the financial planners. The Group now also offers superannuation solutions comprising of trustee services, member administration, and investment management. As on 3^rd November 2020, the market capitalization of the company stood at ~$53.55 million. The service fees revenue of the Group increased by 0.9% from $22,769,969 in FY19 to $22,985,323 in FY20. The revenue from both administration and transaction services increased for FY20. Under the other income sub-head, the company was eligible for receipt of cash flow boosts from the government from May-June 2020. For FY20, the Group has brought all customers together on one transaction platform and integrated the client-facing portal. Some of the clients such as MDA, Xplore Super & Pension Wrap have migrated to XPL’s One Platform as of June 2020.

Income Statement FY20 (Source: Company Reports)

Trading Halt and Proposed Acquisition by HUB24: The company had requested a trading halt at ASX as on 28^th October in relation to its release of a pending announcement for acquisition under a binding scheme implementation agreement. Per the agreement, HUB24 Limited will acquire 100% of the shares in Xplore by way of share scheme for $60 million and 100% of the options in Xplore will be cancelled by way of an option scheme. Through a $50 million fully underwritten placement, HUB has issued 2.5 million new fully paid ordinary shares to the investors at a price of $20 per new share. HUB24 will use these proceeds for the proposed acquisition of XPL, proposed acquisition of Ord Minnett’s Portfolio Administration and Reporting Service for $10.5 million, and for 40% investment in Easton Investment Limited. XPL's management considers the scheme arrangement with HUB24 in the best interest of its shareholders. Hence, it intends to advise its shareholders to vote in favour of the scheme.

Outlook: The company is planning to integrate into One Managed Account Platform – one transaction platform and client facing portal in FY21. The company projects to realize $1.1 million through recurring cost savings in FY21 and beyond. Post integration, the company will move to next phases of grow and outperform as a part of its 3-year strategy to grow the single platform and net retail inflows through it.

Stock Details: The stock of XPL gave a positive return of 200% in the past one month and return of 164.70% in the past three months. Currently, the stock is trading close to its 52-week high of $0.195. Based on the stock performance and other key updates covering the FY20 results, along with the takeover bid by HUB24, we would like to wait and watch the upcoming developments with regards to the business and proposed takeover. The stock closed at $0.18 on 3rd November 2020.

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

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