Stocks’ Details
 

Super Retail Group Limited

 
Sales Growth Achieved in Businesses: Super Retail Group Limited (ASX: SUL) operates specialty retail stores in the automotive, tools, leisure and sports categories. On 26 March 2020, SUL provided a trading update, wherein it informed that it has maintained positive sales momentum in its two largest brands, underpinned by a diversified portfolio of businesses with store locations in both metropolitan and regional areas across Australia as well as New Zealand. Recently, Mitsubishi UFJ Financial Group increased its shareholding in the company to 12.94% from 10.6%.


Group like-for-like trading update as at week 38 (Source: Company Reports)

Covid-19 Update: In Australia, the company continues to deliver online services which include Click and collect and home delivery. However, in New Zealand the group has closed its Supercheap Auto and Macpac stores for a minimum period of four weeks. Moreover, due to the uncertainty surrounding the COVID-19 pandemic, the company has decided to cancel its FY20 interim dividend of 21.5 cents per share. 

Managing Liquidity Position: The company is taking steps to manage its liquidity position and preserve cash. It intends to reduce its cost base, defer non-essential capital expenditure, manage working capital, reduce inventory levels and utilise government tax relief, and other support measures. The company has secured credit approval for a new $100 million bilateral liquidity facility with ANZ Bank.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation 

Price to Earnings Multiple Based Relative Valuation Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of SUL is trading below the average of its 52 weeks low and high price of $3.020 - $10.540, offering a decent opportunity for accumulation. We have valued the stock using price to earnings multiple based relative valuation method and have arrived at a target price of higher single digit upside (in percentage terms). For the purpose, we have taken peers like Bapcor Ltd (ASX: BAP), AP Eagers Ltd (ASX: APE) and GUD Holdings Ltd (ASX: GUD). Considering the company’s positive sales momentum in the last few months, recent measures to manage its liquidity position, and current trading levels, we are giving a “Buy” recommendation on the stock at the current market price of $5.490, up by 10.463% on 9^th April 2020.
 

Holista Colltech Limited

Additional orders for 415,000 bottles of NatShield™ by Health Therapies: Holista Colltech Limited (ASX: HCT) is a natural wellness company that researches, develops, manufactures and markets “health-style” products to address the unmet and evolving needs of natural medicine. In March 2020, the company appointed Health Therapiesas as its exclusive distributor for NatShield™, a handheld sanitiser which contains the Path-Away® active ingredient. Till now, the company has shipped around 9,558 30 ml bottles of NatShield™. On 9^th April 2020, the company announced that Health Therapies has placed additional orders for 415,000 bottles totalling $3.8 million for delivery between April and June 2020.
Binding Collaboration Term Sheet with Skin Elements: Skin Elements Limited and Holista Colltech Limited recently announced a binding collaboration term Sheet to launch a natural alcohol-free hand sanitizer. As part of the agreement, Holista will ship Path-Away® as a concentrate to be included in the manufacture of the Invisi Shield® natural sanitizer.

FY19 Performance: In FY19, the company’s total revenue declined slightly by around 2% to $7.26 million, mainly due to lower sales from the dietary supplements segment. Over the year, the company narrowed its net loss attributable to owners of the parent by around 57% to $689,851 in FY19 from $1,612,147 in FY18. In FY19, the company’s Healthy Food Ingredient Division performed very well with revenue increasing to $163,793, as compared to $25,998 in FY18, mainly due to orders from new customers in China and South Korea.


FY19 Results (Source: Company Reports)

What to expect: The company has received an additional order request by Kawan Food for GI Lite™ worth $308,318, which it expects to deliver by Q2 FY2020. Kawan Food is expected to launch this product by early Q2 FY2020.
Stock Recommendation: In the last six months, the stock has provided a return of around 118.75%. In the second half of FY19, the company reported a gross margin of 61.8%, which is higher than pcp. Over the same time period, the company’s EBITDA margin and net margin have also improved, demonstrating the company’s journey towards profitability. Considering the recent order of additional 415,000 bottles of NATSHIELD™ from Health Therapies, recently signed collaboration agreement with Skin Elements and current trading levels, we have a watch stance on the stock at the current market price of $0.160, up by 14.286% on 9^th April 2020, owing to an update related to U.S. Distributor increasing orders of NatShield™. 

Skin Elements Limited

Binding agreement with Holista Colltech: Skin Elements Limited (ASX: SKN) is an ASX listed skin care company which has developed a portfolio of products which includes its lead product, the Soléo Organics, 100% natural and organic sunscreen, pawpaw based PapayaActivs natural therapeutic skincare, and the Elizabeth Jane Natural Cosmetics brand. The company recently entered into a binding agreement with Holista Colltech to launch an all natural skin-friendly sanitizer, Invisi Shield®, which will position Skin Elements as a global leader in providing high-quality hand sanitisers. Further, this new sanitiser will significantly strengthen the company’s range of existing sanitisers which is being unveiled after two years of product development and test marketing to independent pharmacies, and selected schools and day-care centres in Western Australia.

Half Year Performance Highlights: In the first half of FY20, the company completed the strategic re-branding, expansion and refinement across its entire natural skincare and suncare product range. As a result, the company now has a total of 40 therapeutic and cosmetic skin care products in production, including five new products in the flagship Soléo Organics sunscreen range. Over the half-year period, the company reported revenues from ordinary activities of $85K and incurred a loss of $1.1 million after income tax, predominantly due to the expansion of the product range as it positions the business for growth.


Half year results Snapshot (Source: Company Reports)

What to expect: It is expected that life after COVID-19 will see more use of sanitisers at a personal level. Skin Elements with its recently signed binding agreement and extended healthcare and skincare products is well positioned to become a global leader in providing high-quality hand sanitisers. 

Stock Recommendation: As per the company’s half-year report released on 28 February 2020, Skin Elements has $270,000 production funding facility to provide the working capital for initial production orders for its expanded Soleo Organics and PapayaActivs ranges. In the last one month, the stock has provided a return of 195% and is currently inclined towards its 52 weeks high price of $0.105. Considering the recently signed binding agreement and current trading levels, we have a watch stance on the stock at the current market price of $0.063, up 6.78% on 9^th April 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

Note: Skin Elements Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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