Stocks’ Details

Reliance Worldwide Corporation Limited

Robust Growth in EMEA Segment Sales: Reliance Worldwide Corporation Limited (ASX: RWC) is involved into the manufacturing, designing and supply of water flow and control products and solutions for plumbing industry. Recently, the company with the help of a release announced that Macquarie Group Limited and its controlled bodies corporate have ceased to become a substantial holder in the company from 1^st August 2019. The company would be releasing its financial results for FY19 on 27^th August 2019. The company delivered overall growth of around 50% in reported sales in 1H FY19 against 1H FY18, which includes the addition of John Guest and the positive impact of a weaker Australian dollar on translated revenue. Coming to the EMEA segment, the net sales witnessed a rise of 425% in comparison to the prior period inclusive of sales from John Guest. Adding to that, it was stated that John Guest sales and EBITDA witnessed a rise in accordance with expectations and led by double-digit growth in core JG Speedfit sales in the UK.


Net Sales of EMEA (Source: Company Reports)

What to Expect: Reliance Worldwide Corporation Limited is expecting EBITDA to be between $260 Mn - $270 Mn for FY19 in comparison to the previous guidance of $280 Mn - $290 Mn. With respect to Americas segment, it was stated that the business continues to achieve good underlying growth, particularly at a point of a sale.

Stock Recommendation: The net margin of RWC stood at 12.1% in 1H FY19, reflecting YoY growth of 0.7%, which represents that the company has improved its capability to convert its top-line into the bottom-line. It reported a current ratio of 3.57x in 1H FY19 with YoY growth of 17.2%. This implies that the company has improved its position to meet its short-term obligations. The share price of the company has fallen 28.76% in the past three months as at August 09, 2019 and is trading close to its 52-week low level of $3.105 with PE multiple of 25.75x. Hence, considering the above-stated facts and decent outlook, we give a “Buy” recommendation on the stock at the current market price of A$3.270 per share (1.238% on 9^th August 2019).
 

Cann Group Limited 

Substantial Rise in Revenue: Cann Group Limited (ASX: CAN) is involved into the cultivation of cannabis for medicinal and research purposes as well as manufacturing of medicinal cannabis products. The market capitalisation of the company stood at ~A$281.48 Mn as on 9^th August 2019. Recently, the company with the help of a release announced that Tribeca Investment Partners Pty Ltd has ceased to be a substantial holder in the company from 30^th July 2019. In the June 2019 quarterly report, the company stated that it achieved revenue amounting to $2.3 Mn, reflecting a rise of 413% on the prior financial year. It added that the groundworks at Mildura site is underway and the company has also received import permit from Health Canada. The company’s manufacturing partner IDT has received a medicinal cannabis manufacturing licence. Moreover, IDT has now installed the company’s supercritical CO₂ extraction equipment, which is required for the processing of medicinal cannabis. The following picture provides an idea of the net cash used in operating activities:

 
Net Cash Used in Operating Activities (Source: Company Reports)

Future Aspects: The management of the company would be focused on progressing the construction and development of the new Mildura facility, as CAN moves toward operating at scale. It added that the debt funding arrangements required for the facility are progressing and are anticipated to be confirmed. The company continues to refine its commercial strategy.

Stock Recommendation:The current ratio of the company stood at 49.95x in 1H FY19 in comparison to the industry median of 1.94x, which reflects that the company is well-placed to address its short-term obligations as compared to the broader industry. It reported asset to equity ratio of 1.02x for the same time period against the industry median of 1.86x. Currently, the stock price is trading below the average of 52-week high and low price of $1.525 and $2.950, respectively, indicating a decent opportunity for accumulation. Hence, considering the above-stated facts coupled with decent outlook and current trading levels, we give a “Buy” recommendation on the stock at the current market price of A$1.980 per share (down 0.252% on 9^th Aug 2019).
 

iCar Asia Limited

A Look at Q2 FY19 Performance: iCar Asia Limited (ASX: ICQ) is a small-cap company with the market capitalisation of ~A$80.64 Mn as on 9^th Aug 2019.  Recently, the company released its results for Q2 FY19, wherein, it delivered strong cash receipts from customers of A$3.73 Mn, which was resulted by strong cash collections in all business units including Used Car and New Car throughput all three countries, delivered during a quarter in which elections were held in both Thailand and Indonesia. However, the net operating cashflows witnessed a rise of 48% in comparison to the same period last year and reported a growth of 20% from the previous quarter. Additionally, the cash position of the company improved to A$12.9 Mn because of receipt of A$7.67 Mn from exercising of options in June 2019.


Receipts from Customers (Source: Company Reports)

Future Prospects: As per the statement of CEO of the company, it continued its positive start to 2019 into the second quarter where the company has witnessed strong progress in all 3 countries.Indonesia continued its path in halving its EBITDA losses, and with corporate costs remaining flat, the company remains on track to achieve EBITDA breakeven by the end of 2019.

Stock Recommendation: The gross margin of the company stood at 99.2% in FY18, reflecting YoY growth of 1.5%. The current ratio of the company stood at 2.30x in FY18 as compared to 5.90x in FY17. Coming to the stock’s past performance, it produced returns of -2.50% in the time span of one month. However, in the time period of three months, it generated negative returns of -17.02%. Hence, considering the aforesaid facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.195 per share (up 2.632% on 9^th August 2019).


Comparative Chart (Source: Thomson Reuters)  

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