Evolve Education Group Limited

EVO Details

Evolve Education Group Limited (ASX: EVO) is one of New Zealand’s leading providers of early childhood education and operates under brands such as Lollipops, Active Explorers, Learning Adventures, Little Earth Montessori, Little Lights, Little Wonders, and Pascals. In 2019, the company launched its expansion into Australia with the acquisition of 10 centres.

Result Performance – For the Financial Year Ended 31 December 2020 – (FY20)

The company changed its balance date from 31 March to 31 December during the calendar year 2020. Hence, the audited results for the financial year ended 31 December 2020 are for the nine months from 1 April 2020 to 31 December 2020.

The company reported a revenue of $102.6 million for FY 31 December 2020 as against 12 months to 31 March 2020 revenue of $140.6 million. As per the management, 2020 was a challenging year with lockdowns and restrictions in New Zealand and Australia on the back of Covid-19 infection. The strong beliefs of families, the support of the governments of both countries towards the educational sector, the commitment by the staff, the acquisition of Australian centres in late 2019, and proactive measures taken to improve operations in New Zealand, all enabled EVO to report a better result in the 9 months to 31 December 2020 compared to the previous financial year. Hence, it reported EBITDA of $15.7 million over $8.2 million in FY19. Further, net profit after tax stood at $7.6 million over $13.3 million in FY19.

Key Data (Source: Company Reports)

Recent Updates

• As per the release dated 8 June 2021, the company announced that all centre acquisitions indicated on 5 March 2021 have settled. Now, it operates 115 early education centres in New Zealand and 20 in Australia. Further acquisitions are being envisioned following the capital raise which was accomplished at the end of March 2021. Currently, the company has cash on hand of ~NZ$48 million.

Key Risks:

The company’s activities are exposed to a variety of financial risks: market risk, credit risk, and liquidity risk. The company is exposed to foreign currency risk associated with the Australian dollar. Also, there is considerable uncertainty because of Covid-19 pandemic.

Outlook:

The company currently plans to commence quarterly dividend payments from September 2021 concerning FY20. The Australian operations of the company have been reporting a strong performance. For the week ending 23 May 2021, occupancy in the southern states was 87.8% and over 80% in Queensland. However, NZ operations have not experienced increased occupancy post COVID. For the week ending 23 May 2021, occupancy in NZ was ~70%. Meanwhile, the company expects to gain material cost savings via streamlining center-based and support office costs. Based on current NZ and Australian trading conditions, the company expects underlying EBITDA to be in the ambit of NZ$16 million to NZ$18.5 million in FY21 and NZ$23 million to NZ$25.0 million in FY22.

Valuation Methodology: Price/Earnings Per Share Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been on a correction path. In the process, it fell to $0.765 on the first trading session of the ongoing week but before closing, it cut down the partial loss, and finally closed at $0.830. The technical indicator RSI with a reading around 28, suggests the oversold status for the stock.

Going forward, the stock may have resistance around the 50% retracement level of $0.97 whereas support could be around the 23.6% retracement level of $0.66.

Stock Recommendation:

The stock declined by ~37.12% in 6 months. It has made a 52-week low and high of $0.672 and $1.480, respectively.

Considering the aforesaid facts, we have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price which reflects a rise of low double-digit (in % terms). We have applied a slight premium to its peer average P/E (NTM Trading multiple) considering robust performance of Australian operations as well as decent outlook.

Considering the aforesaid facts, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.830 per share, up 5.732% on 11^th June 2021.

Vmoto Limited

VMT Details

Vmoto Limited (ASX: VMT) is an electric scooter manufacturing and distribution company, in B2B and B2C markets. It manufactures a range of electric scooters from its wholly owned 30,000sqm state of the art manufacturing facility in Nanjing, China.

Result Performance – For the Financial Year Ended 31 December 2020 – (FY20)

For the year ended 31 December 2020, the company reported a rise in total revenue by 33.6% YoY to $61.0 million as it sold 23,547 units of electric two-wheel vehicles, up 18% on FY 2019 and up 117% on FY 2018, where international sales contributed 21,416 units, up 24% on FY2019 and up 112% on FY 2018. Further, it realized EBITDA of $5.8 million, up 102% on FY 2019, positive cash flows from operating activities of $4 million, up 139% on FY 2019, the cash position of $15 million as of 31 December 2020, and no bank debt as of 31 December 2020. Meanwhile, net profit after tax stood at $3.7 million, up 174% on FY 2019.

Key Data (Source: Company Reports)

Key Risks:

The company is exposed to intense competition risk due to low entry barriers and the global inclination towards clean energy vehicles. In addition, the company faces stiff competition from greater financial stability of the competitors, research and development, marketing, distribution channel, and technological obsolescence.

Outlook:

The company is optimistic about the strength of its international growth momentum and, therefore, it expects similar levels of growth to be reported in FY21. It continues to accelerate its strategy of selling high performance and high value electric two-wheel vehicles into global markets and continues to grow both its B2B and B2C distribution network globally. Meanwhile, it secured an order valued at ~$13 million from Greenmo Group. In addition, it is constantly seeking to penetrate various new markets including the world’s largest two-wheel vehicle market in India. Importantly, it is evaluating and developing a new electric delivery three-wheel vehicle to further enhance its product range.

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

Taking support at $0.39, the stock closed at $0.40 on the first trading session of the ongoing week. The technical indicator RSI with a reading around 44 suggests neutral momentum for the stock.

Going forward, the stock may have resistance around a 38.2% retracement level of $0.46 whereas support could be around the lower Bollinger band of $0.36.

Stock Recommendation:

The stock rose by ~77.77% in 1 year. It has made a 52-week low and high of $0.200 and $0.670, respectively.

Considering the current trading levels, global demand for an electric vehicle, company’s capability to meet the growing demand for an electric vehicle, pipeline product launch, and new venture into the three-wheeler vehicle segment, we give a “Speculative Buy” rating on the stock at the current market price of $0.400 per share, up 2.564% on 11^th June 2021. 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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.

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