Redbubble Limited
RBL Details
Change in Interest Substantial Holder: Redbubble Limited (ASX: RBL) engages in commercialisation of range of creatives from independent artist and designer that offers to customers through its website. As per a recent announcement, the company’s substantial holders (Kayne Anderson Rudnick Investment Management, LLC, Virtus Investment Advisers, Inc. and their associates) have undergone change of interest in the company and has increased its voting power to 9.14%, representing 25,003,410 ordinary shares.
Proposed Issue of Securities: The company has proposed an issue of 3,332 ordinary fully paid security at a price of $3.61.
Financial Performance:
- The company has recorded a hike in revenue by 55% to ~$124 million in Q3FY21, compared to $79.8 million in Q3FY20.
- RBL reported an increase in gross profit $39.8 million in Q3FY21 against $25.6 million in Q3FY20.
- The company has recorded an increased EBITDA to $2.2 million in Q3FY21, compared to loss of ~$6.3 million in Q3FY20.
- There is an uptick in gross transactional value of ~$134 million, up by ~58% on a floating basis and ~79% on a constant currency basis.
- The quarter ended with the cash balance of ~$102 million as of 31 March 2021.
- As shown below, RBL posted a sequential topline growth in the last three fiscal periods aided by store expansion and brand building.
Revenue Trend (Source: Analysis by Kalkine Group)
Outlook: The company is focused on acquisition and engagement of artist to contribute to its growth and improve the content delivery. RBL is confident to drive sale growth in CY22-24 through multiple phases such as improvement in digital and physical experience, focus on loyalty and physical purchases, expansion in new geographies and brand marketing.
Key Risks:
- Technology Risk: The company is technology focused business that have cyber-security risk, managing customer data.
- Competition Risk: The company should prioritise the search engine optimisation (SEO) work and improve the website linking structure so that it could give improved navigation experience.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: As per a recent announcement, the company has received jury verdict including award of US$520,000 in an ongoing piece of litigation, relating to alleged intellectual property infringement but decision was limited to the facts of the Brandy Melville case. The stock of RBL is trading below its average 52-weeks' levels of $1.915-$7.350. The stock of RBL gave a positive return of ~87.37% in the past one year and a negative return of ~37.22% in the past three months. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer average EV/Sales (NTM Trading multiple), considering COVID-19 impact and cyber security risk. For this purpose, we have taken peers such as Mosaic Brands Ltd (ASX: MOZ), Michael Hill International Ltd (ASX: MHJ), Baby Bunting Group Ltd. (ASX: BBN), to name a few. Considering the current trading levels and expected upside in valuation levels, uptick in transactional value, healthy cash balance, resilient financial performance, and optimistic outlook, we recommend a ' Buy' rating on the stock at the price of $3.630 as on 15 July 2021, 10:40 AM (GMT+10), Sydney, Eastern Australia.
RBL Daily Technical Chart, Data Source: REFINITIV
Airtasker Limited
ART Details
Airtasker Limited (ASX: ART) provides a web platform and mobile application that connects people to outsource tasks and find local services with the range of task like deliveries, cleaning, photography, graphic design.
Q3FY21 Financial Performance:
- During the period, the company has recorded customer receipt of $8.3 million.
- It reported positive cash flow from operating activities (unaudited) to $0.48 million.
- The quarter ended with the cash balance of $29.7 million as of 31 March 2021.
Revenue Trend & Profitability (Source: Analysis by Kalkine Group)
Key Risks: The temporary lockdown in Melbourne at the end of May FY21 has impacted the marketplace activity and expecting a recent lockdown in Sydney and other capital cities could impact on Q1FY22 performance.
Outlook: The company has exceeded its gross marketplace volume to $153.1 million for FY21 from prospectus forecast of $143.7 million and upgraded guidance of $148-152 million. Despite the lockdown in capital cities, the company has seen a sharp recovery in marketplace and expected to have no impact on FY22. Airtasker has mentioned to release full year results for FY21 in August FY21. The company has revised the revenue forecast to $25.5-26 million for FY21.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: As per a recent update, the company has recorded strong GMV of $39.4 million in Q4FY21, increase by 39.1% compared to Q4FY20. The stock of ART is trading below its average 52-weeks' levels of $0.880-$1.965. The stock of ART gave a negative return of ~24.73% in the past three months and a negative return of ~8.18% in the past one month. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium to its peer average EV/Sales (NTM Trading multiple), considering economic recovery, sharp recovery in marketplace and exceed of guidance performance. For this purpose, we have taken peers such as Seek Ltd (ASX: SEK), REA Group Ltd (ASX: REA), Domain Holdings Australia Ltd (ASX: DHG), to name a few. Considering the current trading levels and expected upside in valuation levels, exceeded guidance on GMV, healthy cash balance, uptick in revenue performance, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.065, down by 0.931% as on 15 July 2021.
ART 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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