Keytone Dairy Corporation

Expansion to Drive Growth: Keytone Dairy Corporation Limited (ASX: KTD) listed on ASX just last month with successful IPO, raising $15 million funding. Total of 75 million shares priced at $0.20 per share were on issue representing a fully oversubscribed offer. The company listed on the New Zealand stock exchange in 2014 and is primarily focused on the powdered dairy products. The group holds multiple certifications with its manufacturing facility having an RMP registered with the New Zealand MPI. Additionally, the foreign manufacturer registration from the CNCA is valid till 2021 which gives the company export option in China. The company already holds the Halal certification Federation of Islamic Associations of New Zealand.

For the full year ended 31 March 2018, KTD posted a lower Net profit at $145,866 against $404,327 posted in the previous year. Net Profit declined primarily as the Operating cost increased substantially during the period from the previous year. On the other hand, it’s second manufacturing facility in Christchurch is in progress and would be operational sometime in the first half of the next year. The company already owns one facility in the same location. The second under construction manufacturing plant would enable KTD to increase its powdered milk production capacity to 5,000 tonnes per year. Automated canning line has been proposed in the second manufacturing facility that would enable Keytone Dairy to produce packaged product cans and comply with the service needs of the private label. Recent option agreement signed by the Keytone Dairy gives the company the option to acquire additional land for expanding its capacity as it unveils new products. We believe that the company is putting its resources and expertise towards achieving higher economies of scale and expand into new markets. Meanwhile, the securities of the group were requested to be placed on a trading halt by the Company pending a response to be made to ASX price query and halt was requested to be until the earlier of the commencement of normal trading on 4 September 2018 or when the announcement is released to the market. Subsequently, the group clarified about being not aware of any information that has led the price rise noted on August 31, 2018. The group also intends to make some management change related announcements based on ongoing discussions.


Unique Business Strategy (Source: Company Reports)

Stock Performance: The listing of the stock on ASX is just over a month old and the run has been stellar, generating a monthly return of 31.82%. Given the expansion and new land acquisition plans of the company, the stock seems to hold potential value for the customers going forward while it looks at slightly high levels. We believe that the stock can be watched out for further developments while it last traded at the market price of $0.47 (up with a daily price change of 8%).
 

Change Financial

Healthy FY18 Performance: Change Financial Limited (ASX: CCA) has surged 30.56% on August 31, 2018, snapping the five days falling streak. Increase in the stock price came on the back of good FY18 results, where the company posted an increase of 79% in the revenue at US$1.07 million compared to US$0.60 million in FY17. Increased Customer acquisition and transaction activity on the ChimpChange has been one of the major drivers of growth this fiscal year for Change Financial. Additionally, the company also witnessed higher fee realization related to interchange fee, cheque deposit fee, out-of-network ATM fee and interchange fee. However, net loss after tax for FY18 was $9.04 Mn against $8.76 Mn in FY17. On the other hand, the company recently announced that founder Ashley Shilkin has been reinstated as the CEO, following the resignation of Eric Bachman, who was appointed as CEO on 1 August 2018. While there has been speculation on returning to the core business model and block chain based moves (investment in Ivy Koin) under discussion with the change in management, the group has not explicitly highlighted any such shift.


Financial Highlights (Source: Company Reports)

Stock Performance: The stock recently gave breakdown from its long-held support level of $0.47 and spiraled lower. However, at the current level, the price seems to be bottomed out with relative strength indicator just recovering from the oversold region and moving higher. Investors who missed the earlier rally in the stock might now keep an eye. We believe that decent financial performance in FY18 and rebounding stock price support the outlook on a positive side. We recommend a ‘Hold’ on the stock at the current market price of $ 0.235. 

 

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