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GWA Group Limited
GWA Details
H1FY22 Financial Update: GWA Group Limited (ASX: GWA) provides bathroom, kitchen, laundry products, and heating and cooling systems. The company caters to Australia, New Zealand, the United Kingdom, and China through its distribution channels. On 3 March 2022, Mr U B Meyerhans (Director) increased his interest by 65,217 indirect shares at a consideration of $155,356.
GWA Normalised Results; Analysis by Kalkine Group
Key Risks and Challenges
The company is contracting its free cash flow position by inventory build-up to sustain the challenges in supply chain management. The domestic pallet shortages hold the potential to disrupt the production line.
Outlook
The R&R segment in Residential/Commercial activity is expected to remain positive with continued momentum in residential-detached complaints. Australian prices surged by 4% (effective December 2021), offsetting increased freight costs. Inventory levels are robust enough to counter supply chain disruptions.
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: The stock of GWA gave a negative return of ~16.906% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $2.200 - $3.200. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the recent decrease in dwellings and a potential slowdown in construction activities, the company might trade at a slight discount to its peers’ EV/Sales multiple average. For valuation, few peers like Reliance Worldwide Corporation Ltd (ASX: RWC), Johns Lyng Group Ltd (ASX: JLG), MAAS Group Holdings Ltd (ASX: MGH) and others have been considered. Given the decent fundamental growth, prudent liquidity position, favourable inventory management, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $2.300, as of 15 March 2022.
Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
GWA Daily Technical Chart, Data Source: REFINITIV
BSA Limited
BSA Details
Business Updates: BSA Limited (ASX: BSA) provides contracting services to subscription TV and telecommunication companies who require satellite and telecommunication installation services.
H1FY22 Financial Update
Financial Snapshot; Analysis by Kalkine Group
Key Risks and Challenges
The underperformance of operating metrics in H1FY22 may significantly impact FY22 results. The recent labour shortage in the Australian market has been challenging for the commercial services & suppliers’ industry.
Outlook
BSA stands on track to hit $750 million in revenue by FY24 with returns in the range of at least 6% to 8% via a combination of organic and inorganic growth opportunities. The company is observing a resurgence in standard operational patterns.
Valuation Methodology: Price/Earnings 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: The stock of BSA gave a negative return of ~63.333% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.085 - $0.335. The stock has been valued using the Price/Earnings multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering abnormal operating movements and shrinking cash flows, the company might trade at a slight discount to its peers. For valuation, few peers like Namoi Cotton Ltd (ASX: NAM), Millennium Services Group Ltd (ASX: MIL), SG Fleet Group Ltd (ASX: SGF) and others have been considered. Given the decent top-line performance, decent FY24 revenue target, commercial services & suppliers industry resurgence, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.105, down by ~4.546%, as of 15 March 2022.
Markets are currently trading in a highly volatile zone due to certain macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.
BSA Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decisions should depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is 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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