Stocks’ Details

Australian Dairy Nutritionals Group

A Look at FY19 Results:Australian Dairy Nutritionals Group (ASX: AHF) is a Dairy Farm aggregator and operator focused towards milk production. The market capitalisation of the company stood at A$42.26 Mn as on 18^th October 2019. The company recently updated the market with its financial results for the year ended 30^th June 2019. The financial year 2019 demonstrated decent progress and investment in strategic objectives to position the group in strong standing for FY20.



Consolidated Profit & Loss Statement (Source: Company Reports)

What to Expect:AHF made good progress in the conversion of its dairy farms to organic milk, bringing the timeline forward with the purchase of the “Yaringa” farm in November 2019. It added that the conversion of the remaining farms is on track with all farms achieving full conversion during the calendar year 2021.The company intends to outsource infant formula arrangements to existing Australian producers and to develop new brands by using organic milk produced in its own farms.

Stock Recommendation:AHF anticipates revenue from existing operations to materially increase in FY20 and farm feed prices are anticipated to decrease due to favourable conditions with the start of the season in South-West Victoria.On the valuation front, the stock of AHF is trading at EV to sales multiple of 2.5x in comparison to the industry median (Consumer Non-Cyclicals) of 1.9x. As per the ASX, AHF is trading at its 52-week low of A$0.115. On the stock performance front, it produced negative returns of 11.54% and 17.86% in the time span of one month and three months, respectively. Thus, considering the above-stated facts and current trading levels, we have a watch stance on the stock at the current market price of A$0.115 per share on 18^th October 2019.
 

Centrepoint Alliance Limited

2019 Annual General Meeting:Centrepoint Alliance Limited (ASX: CAF) and its controlled entities operate in the financial services industry within Australia and provide a range of financial advice and licensee support services along with investment solutions to financial advisers, accountants and their clients throughout Australia. The company also provides lending mortgage aggregation services to mortgage brokers. The market capitalisation of the company stood at A$17.12 Mn as on 18^th October 2019. The company recently announced that it would be conducting its 2019 Annual General Meeting on 15^th November 2019. On the financial performance front, the company reported profit before tax of $1.2Mn as compared to a loss amounting to $3.4 Mn in FY18. In FY19, CAF made a software investment of $1.3 Mn in order to improve scale and service experience for advisers. However, Centrepoint is maintaining a decent balance sheet which might support its growth prospects, going forward.


Group Balance Sheet (Source: Company Reports)

Future Aspects:As per the annual report 2019, the company stated that the underlying consumer demand for advice is likely to be decent.  The company in FY20 expects the rollout of a new digital content portal for advisers, Centrepoint Connect, which provides intuitive access to more than 700 essential policies and documents.

Stock Recommendation:The company will invest in technology and data to enable greater scale, better insights, and superior services. On Valuation front, the stock of CAF is trading at a price to book multiple of 1.0x in comparison to the industry average (Financials) of 2.8x on TTM (trailing Twelve Months) basis. The company has EV to sales multiple of 0.1x against the industry average (Financials) of 9.4x on TTM basis. Therefore, it can be said that CAF is undervalued at the current trading levels. On price performance front, the stock corrected 20% in the last one year. The stock is currently trading slightly below the average of its 52-low and high of $0.081 and $0.175. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.120, up 4.348% on 18^th October 2019.
 
 

Fluence Corporation Limited

Raising of Capital:Fluence Corporation Limited (ASX: FLC) is involved in the delivery of innovative, cost-effective decentralised water, wastewater and reuse solutions for business and communities anywhere in the world and has a market capitalisation of A$271.41 Mn as on 18^th October 2019. Recently, the company updated the market that it has successfully raised capital amounting to A$36.0 Mn via a placement of around 81.8 Mn of ordinary shares to sophisticated and professional institutional investors at an issue price of A$0.44 per share. Due to the respectable level of demand, the company has accepted 20% oversubscriptions to the indicative transaction size of $30.0 Mn. The company is also offering a Share Purchase Plan to raise up to a further A$6 Mn before costs.

The company intends to utilize the net proceeds from the placement to finance the continued expansion in China for MABR sales, bolster geographic expansion, CES projects guarantees, optimize the business’ cost structure, and for general corporate purposes.The additional proceeds from SPP would be applied to further growth working capital.


Timetable for SPP (Source: Company Reports)
Future Guidance:With respect to the opportunity in China, the company stated that in the current five-year plan, the Chinese Government is aiming and providing finance for an increase in rural wastewater treatment to reach Class 1A effluent discharge from only 10% at the start of the Plan, to 70% in 2022. Hence, China happens to be a significant long-term market opportunity and an important strategic market for the company.

Stock Recommendation:For FY19, the company expects Smart Product Solutions revenue to come in at US$26 million, reflecting a growth of 18% in comparison to 2018. On the valuation front, the stock of FLC is trading at an EV to sales multiple of 1.5x in comparison to the industry average (Industrials) of 21.0x on TTM basis. Looking at the stock price movement in the recent past, the stock of FLC corrected 17.12% in last three months. Therefore, in light of above-stated facts and stock price movement in recent past, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.460 per share, down 8.911% on 18^th October 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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