Stocks’ Details

Zoono Group Limited

FY21 Financial Performance: Zoono Group Limited (ASX: ZNO) involves in the research, development, and commercialisation of a range of antimicrobial products globally that includes hand sanitisers, textile applicators, mould remediation, and surface sanitisers.

• The company has recorded a decrease in its revenue by 29.2% to NZ$27.13 million in FY21, compared to NZ$38.32 million in FY20. It reflected due to an impact of the COVID-19 pandemic globally and overordering of products in April 2020.
• The company has reported a decrease in EBITDA by 69.6% to NZ$6.3 million in FY21 vs NZ$20.7 million in FY20, impacted due to rise in operating costs.
• The company has reported a decline in its profit to NZ$4.63 million in FY21 from NZ$16.65 million in FY20, caused by reduced revenue and margins from large B2B customers.
• The cash position of the company stood at NZ$4.9 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- Due to the COVID-19 pandemic, the company has experienced significant supply chain challenges.
• Regulatory Risk- To commercialise its product, the company requires regulatory approval, and any delays could impact its operations.

Outlook:

• The company is strategizing to increase its B2B customers by adding BDMs and sales representatives in target markets to drive growth in FY22.
• The company expects a sale and earnings growth in FY22, as ease down in lockdown restriction will lead to opening up of corporates and buildings.
• A successful trial in spraying on cardboard packaging for fruit and vegetables, preventing mould that has the potential to deliver sales growth in ley markets going forward.

Stock Recommendation: The stock of ZNO is trading below its average 52-weeks' levels of $0.450-$2.230. The stock of ZNO gave a negative return of ~29% in the past six months and a negative return of ~32.60% in the past three months. On a TTM basis, the stock of ZNO is trading at a P/E multiple of 16.8x, lower than the industry average (Personal & Household Products & Services) of 20.8x, thus seems undervalued. Considering the current trading levels and valuation on a TTM basis, decent balance sheet, expected economic recovery, expansion in key target markets and the key risks associated with the business, we recommend a 'Speculative Buy” rating on the stock at the current market price of $0.465 as on 08 September 2021, 02:46 PM (GMT+10), Sydney, Eastern Australia.

ZNO Daily Technical Chart, Data Source: REFINITIV

Keytone Dairy Corporation Limited

Upgrade of Manufacturing Plant: Keytone Dairy Corporation Limited (ASX: KTD) is engaged in the manufacturing and sale of dairy, health and wellness & nutritional products. As per a recent update, the company has announced that it has completed the expansion and upgrade of its snacking and bar line and manufacturing plant in Prestons, Sydney. It expects to begin commercial runs for clients in September 2021, with the receipt of decent opening orders.

 Q1FY22 Performance Update:

• During the period, KTD has reported robust growth in the sales pipeline for the balance of FY22.
• Total sales grew by ~17% to ~$13.4 million in Q1FY22, compared to $11.3 million in the pcp. The growth was achieved on the back of decent performance from the New Zealand Dairy business and the Australian Contract Manufacturing and Proprietary Brands divisions.
• Net cash outflow from operating activities decreased to ~$1 million during the quarter, from over $3 million in the prior quarter, owing to key strategic decisions.
• It ended the quarter with a cash balance of $3.8 million as of 30 June 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is prone to supply risk in times of high demand and has to look to keep its inventories stocked to meet the needs.

Outlook: The company has embarked on key strategic and tactical decisions, which positions the company for scalable growth in FY22. It expects the growth momentum to continue with the easing of global logistics delays and improvement in procurement management. It has also implemented a strategy of opportunistic purchase of inventory which will aid in margin improvement.

Stock Recommendation:  On 30 August 2021, the company has announced that it has signed a deal with a Chinese brand that opens orders amounting to ~$1.8 million, which will be delivered through the December 2021 quarter. It has also recently announced that its proprietary Super Cubes Wholefoods brand and plant-based bars have been accepted into Woolworths stores. As per ASX, the stock of KTD is trading below its average 52-weeks’ levels of $0.110-$0.300. The stock of KTD gave a negative return of ~34.99% in the past six months and a positive return of ~13.04% in the past one week. On a TTM basis, the stock of KTD is trading at an EV/Sales multiple of 1.0x, lower than the industry median (Consumer Non-Cyclicals) of 1.7x, implying undervaluation. Considering the current trading levels & valuation on TTM basis, increase in sales in Q1FY22, decent business performance, execution of strategies, optimistic outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.130, down by ~3.70% as on 08 September 2021.

KTD Daily Technical Chart, Data Source: REFINITIV

 Wellnex Life Limited

Business Update: Wellnex Life Limited (ASX: WNX) is engaged in the sale and distribution of health and wellness products. As per a recent update, the company has provided an update on its business activities for the months of July and August 2021.

• Revenue grew by ~49% in July and August 2021, compared to the pcp.
• It has received ~$1 million initial purchase order for the new Wagner Liquigesic (Liquid Paracetamol Soft Gel Capsule). It has also received purchase orders for Wakey Wakey and The Iron Company products, which is to be shelved in major pharmaceutical and grocery retailers.

FY21 Performance Update:

• Total revenue (including other income) increased by 29.6% to $1.43 million in FY21, compared to the prior year. This was achieved on the back of an increase in distribution and sales of the existing Little Innoscents and Uganic brands.
• Net loss narrowed down by ~46% to $24.9 million during the year.
• The acquisition of BSA is expected to provide revenue comfort to the company in FY22 and onwards.

Trend in Operating Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to funding risk, which might impact the ability of the company to continue with its operations.

Outlook: The company believes that it is on track to exceed $21 million in FY22 revenues, which will be an improvement on the FY21 results. The growth will be on the back of decent sales from its existing product lines, as well as the expected launch of new brands and products range in FY22.

Stock Recommendation: The company has recently strengthened its capital position by the conversion of $7.1 million in borrowing to equity at the price of $0.15 per share and also raised $2.1 million in a rights issue. As per ASX, the stock of WNX is trading below its average 52-weeks’ levels of $0.099-$0.170. The stock of WNX gave a negative return of ~77.03% in the past one year and a negative return of ~14.81% in the past one month. Considering the current trading levels & improved top-line performance in July & August 2021, receipt of purchase orders and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.1150, down by ~4.167% as on 08 September 2021.

WNX 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 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.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.