Zoono Group Limited

ZNO Details

Corporate Update: Zoono Group Limited (ASX: ZNO) is a developer, manufacturer, and distributor of antimicrobial solutions. As of 9 April 2021, the market capitalisation of the company stood at ~$132.21 million. ZNO reported a sales invoice of $7 million on hand as of 31 December 2020. It has shipped sales of over $5 million as of now besides the new quarterly sales in Q3FY21. On 1 April 2021, ZNO updated the investors on the successful testing of its main product, microbe shield (MS), against the human coronavirus 229E and met the US EPA Standard ASTM E1053. ZNO has inked a partnership with Boeing to offer its products to airlines’ worldwide. Its MS product met the airlines’ specification protocol and is presented on the Boeing digital store.

The company has expanded its distribution network in Europe and awaiting initial orders. Microsoft, US has placed an initial purchase order for its Redmond Campus in Washington. To reduce its dependence on suppliers, ZNO has decided to commence in-house production of plastic bottles in the coming future. ZNO has recently submitted more patent applications for protecting its formulations / specialised applications.

Release of Escrow Shares: ZNO announced the release of 300k fully paid ordinary shares’ subject to the wilful escrow for two years from issue. These shares were released on 15 March 2021.

A Look at 1HFY21 Results: The company reported a revenue of NZ$14.42 million, up by ~741% YoY during 1HFY21, due to the uptick in the existing & new distributors and expansion of its distribution network. It earned an operating cash inflow of NZ$3.58 million in 1HFY21. Its NPAT during the period stood at NZ$1.90 million, up by 362% YoY. During 1HFY21, ZNO acquired Zoono USA LLC, its US distribution firm, for US$4.45 million. ZNO held a cash reserve of NZ$7.27 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company faces the risk of COVID-19 lockdowns in the UK, Europe, with an effect on its vital supply contracts, and the chance of Brexit causing shipping challenge to its customers regarding timelines. 

Outlook: ZNO is planning for its US distribution launch in May. It has made its initial shipment to Russia and has notified significant monthly orders to follow as per its contract. It aims to complete all product registration in the EU and distribute the product in 20 EU countries. ZNO anticipates the start of shipping orders to the Middle East and North Africa (MENA) region in 2HFY21. ZNO also anticipates starting its production of 1 million bottles in the immediate future.

Stock Recommendation: The stock of ZNO gave a positive return of ~32.06% in the past month and a negative return of ~33.96% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level of $0.585-$3.29. The stock of ZNO has a support level of ~$0.758 and a resistance level of ~$1.061. On a TTM basis, the stock of ZNO is trading at an EV/Sales multiple of 2.7x, lower than the industry (Personal & Household Products & Services) average of 3.9x, thus seems undervalued. Considering the current trading levels, growth in 1HFY21 revenue and bottom-line, expansion in the EU markets, launch in the US and other markets, and valuation on a TTM basis, we recommend a ‘Hold’ rating on the stock at the current market price of $0.870, up by 8.074% on 9 April 2021.

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

Alexium International Group Limited

AJX Details

Results of 1HFY21 Released: Alexium International Group Limited (ASX: AJX) is a developer of specialty chemicals and nature-friendly flame retardants for application in textiles, electronics, packaging, and building materials. Alexiflam and Alexicool are its two key products. As of 9 April 2021, the market capitalisation of the company stood at ~$35.81 million. The company reported an increase of 13.7% YoY to US$3.61 million during 1HFY21, owing to the higher product sales of Alexicool®. Its gross margin on pcp has declined due to a change in product mix. Its operating expenses were in sync with 1HFY20. AJX is experiencing momentum in the manufacturing in the bedding industry with a shift, signalling towards digital sales channels. It recorded a net loss of US$1.79 million, down by 59% YoY for 1HFY21, due to a debt facility extinguishment. It received cash receipts from customers of US$3.91 million, slightly higher than US$3.81million in 1HFY20. AJX held a cash balance of US$3.84 million as of 31 December 2020. 

1HFY21, P&L Highlights (Source: Company Reports)

Key Risks: The company faces the risk of COVID-19 by the closure of manufacturing plants, slowing down of purchase orders, cancellation of business travel. It meets the risk of demand slowdown from user industries and changes in the sales channel in the bedding business from traditional to online, given the pandemic crisis.

Outlook: AJX has inked its maiden customer contract for its Alexicool® Total Mattress Cooling Systems and targets initial sales for 2HFY21. It is also developing Alexiflam® products NF Sock and FR NyCo with production scale work and production testing underway.

Stock Recommendation: The stock of AJX gave a negative return of ~6.45% in the past six months and a positive return of ~26.08% in the past one-year. The stock is currently trading lower than the 52-weeks’ average price level of $0.035-$0.10. The stock of AJX has a support level of ~$0.025 and a resistance level of ~$0.098. Considering the current trading levels, decent increase in revenue and improved net loss position for 1HFY21, decent growth plans of expanding the product lines, and associated risks of the pandemic and new product introductions, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.057, up by 1.785% on 09 April 2021.

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

Note: 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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