Jatcorp Limited

JAT Details

Signed a Supply Agreement with Shandong Puxuan Trading Co.: China-Australia trade specialist, Jatcorp Limited (ASX: JAT) develops and markets a portfolio of in-house branded FMCGs, focusing on growth opportunities in dairy products. Its market capitalisation as on February 17, 2021, stood at ~$39.57 million.  As per the recent update, JAT’s subsidiary, Sunnya Pty Ltd, has inked an agreement to supply its full range of Neurio products to Shandong Puxuan Trading Co., Ltd (SPT) over the next 12 months. In the previous update, the company announced the expansion of the ANMA manufacturing facility in Melbourne, and the works for the expansion are expected to be completed at the end of February 2021.

December 2020 Quarter Highlights: In the December quarterly update, the company highlighted that its Sales rebounded, up 111% on September quarter. This was due to lockdowns in Australia and internationally in the previous quarter, which resulted in the closure of daigou stores and trade between China and Australia being slowed. Revenue increased to $9.1 million (unaudited), which was more than double the revenue of $4.3 million (unaudited) in the September 2020 quarter.

Operating Cash Outflow (Source: Company Reports)

FY20 Result Highlights: As per the company’s FY20 result report (year ended June 30, 2020), revenue stood at $59.45 million, a decline of 10.52% on previous year. Loss from ordinary activities after tax for the year stood at $26.59 million, an increase of 29.75% on previous year. Net tangible assets backing per share for the period stood at -0.009 cents per share, as compared to 0.004 cents per share in the previous year.

Outlook: As the economies are recovering, the cross-border trades have started gaining momentum. Chinese economy showcasing the fast recovery is good for the NZ dairy business. The company’s new agreements and extension of its agreements are expected to help it boost its earnings in the coming period.

Stock Recommendation: JAT’s share return for six months and one year were 3.57% and -39.58%, respectively. Its gross margin for FY20 stood at 21.1%, better than 13.0% in FY19. However, its EBITDA margin and net margin for FY20 were negative. Its current ratio declined from 1.76x in FY19 to 0.99x in FY20. On the technical analysis front, the stock has a support level of ~$0.02 and resistance of ~$0.033. On a TTM basis, the stock is trading at a Price to Book multiple of 6.2x, higher than the industry average of 4.0x. Considering the aforesaid facts and looking at the chart, it is clearly visible that the stock is moving in a downtrend, therefore, it is advisable for investors to wait for any trend reversal confirmation to build any long position. Hence, we give an ‘Avoid’ rating on the stock at the current market price of $0.028, down by 9.678% on 17 February 2021.

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

Roto-Gro International Limited

RGI Details

Repayment of Convertible Notes: Australian company, Roto-Gro International Limited (ASX: RGI) utilises its state-of-the-art, automated agricultural cultivation technology to provide sustainable and cost-effective solutions to both conventional and indoor vertical farms. Its market capitalisation as on February 17, 2021, stood at ~$13.19 million. The company recently announced repayment of the Obsidian Global GP, LLC (Obsidian) Convertible Note. The Convertible Note facility-drawn down worth $1.25 million, was secured in two tranches as announced in August 2020, where Obsidian elected to convert the full value of the note to securities in the Company and repayment of the note has been paid in full.

December 2020 Result Highlights: Under the December 2020 quarter activities report, the company highlighted that it remained focused on establishing itself as a leading agricultural technology supplier to the indoor vertical farming market for the cultivation of lawful cannabis and perishable foods. In the three months period, RGI executed an AUD$10 million Technology License Agreement with Verity Greens Inc., which established the company’s path to roll out its commercial operations in the global indoor vertical farming market.

The company also executed a Purchase and Sale Agreement with Canniberia LDA, which provides for an AUD$2.03 million technology purchase order for RotoGro’s Patented and Proprietary Model 420 Rotational Garden Systems and Plant Nutrient Management Systems. It also inked a Growing Management Services Agreement with Canniberia, which is conditional upon Canniberia being granted a lawful cannabis cultivation licence and subject to the successful completion of the Purchase and Sale Agreement. At the end of the period, the company’s net cash balance stood at $1.30 million.

Operating Cash Outflow (Source: Company Reports)

FY20 Result Highlights: As per its full year report (ended June 30, 2020), the company’s revenues from ordinary activities stood at $0.90 million, an increase of 27.5% on the previous year. Loss for the year attributable to the owners of Roto-Gro International Limited stood at $15.88 million, an increase of 157.2% on previous year. Net tangible assets per ordinary security for the period stood at 0.004 cents as compared to 2.697 cents in the prior year.

Outlook: RGI continues to develop the existing sales pipeline for technology sales into the indoor vertical farming space for the cultivation of both lawful cannabis and perishable foods. Moreover, the Company is focussed on maintaining healthy commercial relationships with prospective customers. Currently, it has several proposed technology sale and purchase agreements with customers for review, along with numerous new sales leads into the United States of America, the United Kingdom and Europe.

Stock Recommendation: RGI’s share return for six months and one year are 21.74% and -53.33%, respectively. Its EBITDA margin and net margin for FY20 were negative. Its ROE for FY20 stood at -100.6%. On the technical analysis front, the stock has a support level of ~$0.049 and resistance of ~$0.07. Considering the aforesaid facts and the stock's presence in consolidated zone/channel, it is advisable for investors to wait for a breakout to build a long position in it. Hence, we give an ‘Avoid’ rating on the stock at the current market price of $0.056, a decline of 3.449% on 17 February 2021.

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

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.