Stocks’ Details
 

OneVue Holdings Limited

Decent Financials in Q1FY20:OneVue Holdings Limited (ASX: OVH) is a wholesale service provider to the wealth management industry. The market capitalisation of the company stood at A$101.81 Mn as on 8^th January 2020. During FY19, the company experienced a rise of 35% in revenues where Fund Services and Platform Services represented 64% and 36% of total revenues, respectively. The Platform Services business of the company delivered record gross and net inflows, while it managed to remain in the top tier of platforms as ranked by the Investment Trends. Moving to the performance of Q1 FY20, in Platform Services, there were strong quarterly gross inflows amounting to $488 Mn, reflecting a rise of 56.2% on pcp. 


Performance of Fund Services (Source: Company Reports)

Execution of Four Pillar Strategy: In FY 2020, the company would execute on four pillars of its strategy, i.e., 1) Automation and integration, 2) Innovation, 3) Scale, and 4) Building brand awareness. The company stated that the favourable structural environment underpinned by government mandated superannuation is anticipated to underpin a positive outlook for FY20, and beyond.

Valuation Methodology: EV/ Sales Multiple Approach

EV/ Sales Multiple Approach (Source: Thomson Reuters)

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

Stock Recommendation:In Fund Services, with respect to managed fund administration, a record number of items were processed in Q1 FY 2020 and the figure stood at 173,687 reflecting a rise of 44% on pcp basis. Notably, this growth was helped by the addition of new funds as well as ongoing growth from the existing funds. 

As per ASX, the stock of OVH is trading closer to its 52-week lower levels, which could be understood as the better entry levels. We have valued the stock using EV/ Sales multiple approach and arrived at a target price with an upside of lower double-digit (in percentage terms). Therefore, in the light of decent performance in Q1FY20, favorable outlook and valuations, we give a “Speculative Buy” recommendation on the stock at the current market price of A$ 0.370 per share, down by 2.632% on 8^th January 2020.

Centrepoint Alliance Limited

Turnaround in Financial Year 2019:Centrepoint Alliance Limited (ASX: CAF) operates in the financial services industry within Australia. It provides a range of financial advice as well as licensee support services. The market capitalisation of the company stood at A$19.35 Mn as on 8^th January 2020. The company recently announced that it has appointed Alexander (Sandy) Beard on the role of Independent Non-Executive Director, which became effective on 1^st January 2020. The company experienced a turnaround in FY19 to the profit before tax amounting to $1.2 Mn from a loss of $3.4 Mn in FY18.


Financial Results (Source: Company Reports)

Key Focus of CAF:For FY20, the key focus of the company would revolve around attracting a healthy share of displaced advisers who seek quality and sustainable service provider. The company stated that the trend towards smaller, independent advice firms should favour the strategy of the company over the longer term.

Stock Recommendation: Gross margin and EBITDA margin of the company stood at 26.1% and 2.0% in FY19, reflecting YoY growth of 0.3% and 3.4%, respectively. Current ratio of the company stood at 1.49x in FY19 as compared to 1.11x in FY18. This implies that the company has improved its position to address its short-term obligations. The stock is available at EV to sales multiple of 0.2x as compared to the industry average (Financials) of 10.4x on TTM basis. The stock of CAF is trading at a price to book multiple of 1.2x against the industry average (Financials) of 3.4x on TTM basis. Hence, considering the growth in key margins, decent liquidity position, and lower valuations, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.130 per share on 8^th January 2020. 

Yowie Group Ltd

Improvement in EBITDA Loss:Yowie Group Ltd (ASX: YOW) is a global brand licensing company, with specialisation in the development of consumer products designed to promote learning. The market capitalisation of the company stood at A$12.44 Mn as on 8^th January 2020. As per the recent release by the company, the return of capital amount per security stood at A$0.02000000.  During Q1FY20, the company reported a rise of 23% in net sales and the figure stood at US$4.5 Mn. The company also experienced strong US Yowie core sales as well as the addition of Bites/Gummies. The company’s EBITDA loss was US$22k in Q1 FY20 against US$178k in the previous year.

 
EBITDA Improvement (Source: Company Reports)

What to Expect:The company is on track to deliver revenue growth in FY20 and improving EBITDA and positive operating cash flow run rate while contending with an extremely competitive US confectionary market.

Stock Recommendation:For Q1FY20, the company reported cash receipts from customers of US$3.7 Mn. Current ratio of the company stood at 6.90x in FY19 against the industry median of 1.42x. This reflects that the company is in a decent position to address its short-term obligations as compared to the broader industry. Gross margin of the company stood at 45.1% in FY19 versus 39.7% of the industry median. The stock of YOW is trading at a price to book multiple of 0.4x on TTM basis as compared to the industry average (Consumer Non-Cyclicals) of 3.6x. Therefore, considering decent increase in net sales in Q1 FY20, decent outlook and continued increasing retail distribution, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.057 per share as on 08 January 2020. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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