Retail Food Group Limited

RFG Details

Key Takeaways from 1HFY21 Results: Retail Food Group Limited (ASX: RFG) is a food and beverage firm owning multi-brand retail food franchise network distributing coffee products globally. As of 21 June 2021, the market capitalisation of RFG stood at ~$154.76 million. On 24 May 2021, RFG announced that Regal Funds Management Pty Limited (RFM) holds 309.61 million shares with 14.60% voting rights in RFG. The company posted $85.12 million of revenue in 1HFY21, down by 52.4% YoY. This decrease was due to the impact of COVID-19 and a reduction in store numbers in 2HFY20 and 1HFY21. It witnessed robust performance for its Brumby’s Bakery division with Same Store Sales (SSS), up by 11.7% and 6.7% up for QSR (Crust/Pizza Capers) division, in 1HFY21. The Underlying NPAT increased to $12 million in 1HFY21, up by 60% YoY. RFG recorded net cashflows of $8.94 million from operating activities in 1HFY21 versus cash outgoings in 1HFY20. It held a cash and cash equivalents balance of $43.05 million in 1HFY21.

Revenue & Net Income Trend from FY16-FY20; (Analysis by Kalkine Group)

Key Risks: The company is exposed to the COVID-19 impact of shopping centre closures in Victoria, New South Wales (NSW), customer traffic declines. Its international operations were affected by government trading restrictions.

Outlook: The company is focusing on improving its domestic franchise network performance & sustainability. RFG plans to reinvigorate the marketing operations, launch a new Crust value model. It intends to deploy a new field service team and plans to facilitate the growth of new multi-store franchise outlets. 

Stock Recommendation: The stock of RFG gave a negative return of 14.63% in the past six months and a positive return of 18.64% in the past year. The stock is currently trading lower than the 52-weeks’ average price level of $0.057-$0.105. On a TTM basis, the stock of RFG is trading at a price to book value multiple of 0.9x, lower than the industry (Consumer Non-Cyclicals) median of 1.6x, and thus seems undervalued. Considering the current trading levels, positive net cash flows from operating activities in 1HFY21, fiscal discipline exercise and plans for new store outlets, and increase marketing activities in 2021, and associated risks of COVID-19 restrictions and uncertain retail environment, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.070, down by ~4.110% on 21 June 2021.

RFG Daily Technical Chart, Data Source: REFINITIV 

Yowie Group Limited

YOW Details

Key Takeaways from March Quarter (Q3FY21): Yowie Group Limited (ASX: YOW) is a brand licensing firm specialising in developing and expanding consumer products designed to facilitate learning. As of 21 June 2021, the market capitalisation of YOW stood at ~$9.17 million. The company posted net sales of US$3,048K in the March quarter, up by 29% YoY due to higher consumer consumption and order backlog filling. YOW registered a rise in Group EBITDA to US$151,000 in Q3FY21 versus US$683,000 of loss in Q3FY20. This rise was due to reduced logistics, administration and marketing, expenses. YOW reported US$2.55 million of cash receipts from the customers in Q3FY21. It recorded an increase of US$106,000 in net cash in Q3FY21.

Revenue & Net Income Trend from FY18-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of change in consumer spending and consumption, closure of manufacturing facility due to COVID-19. It is exposed to changes in the supply chain and distribution due to travel restrictions. 

Outlook: YOW reported plans to introduce its previous “Blast from the Past” series in Australia in May and in the US in Q4FY21. It plans to continue the distribution and trade programs mapping competitor levels across channels. It will continue to exercise fiscal discipline and cash management to drive improved margins.

Stock Recommendation: The stock of YOW gave a positive return of 10.81% in the past six months and a positive return of 7.89% in the past nine months. The stock gave a positive return of 119.66% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $ 0.025-$0.061. On a TTM basis, the stock of YOW is trading at a price to book value multiple of 0.9x, lower than the industry (Food & Tobacco) median of 1.4x, thus seems undervalued. Considering the current trading levels, increase in net sales and Group EBITDA in March quarter and positive YTD21 EBITDA, valuation on a TTM basis, and associated risks of inventory management, and manufacturing closures due to COVID-19 pandemic, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.041, down by ~2.381% on 21 June 2021.

YOW Daily Technical Chart, Data Source: REFINITIV 

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. 

Technical Indicators Defined: -

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.

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