Stocks’ Details

FlexiGroup Limited 

Q1FY21 Result Highlights: FlexiGroup Limited (ASX: FXL) is a diversified full-service payments company serving a broad footprint of millennial spenders, through to young families and small and medium businesses. As on 20 November 2020, the company’s market capitalisation stood at ~$559.65 million. During Q1FY21, the company witnessed solid volume performance in Buy Now Pay Later and Commercial, despite the business continuing to take a prudent approach to credit risk and approvals. The company’s cost to income ratio stood at 45% in Q1FY20, down by 210bps on pcp. 

The company recently announced that humm has signed an exclusive two-year arrangement with AGL Energy’s direct to customer renewables installations.

1QFY21 Performance (Source: Company Reports)

Strategic Partnership with Mastercard: On 19 November 2020, the company announced a strategic partnership with Mastercard to globally expand the application and distribution of bundll, the world’s first BNPL everywhere platform built by humm. It is expected that this agreement will deliver a stainable growth path for humm and will help in expanding the services that schemes can provide to customers.

Outlook: Looking ahead, the company is focused on transforming and consolidating its position in interest-free instalments for millennials, young families and SMEs. Further, the company is focused on leveraging the strong humm brand into new products, new verticals and new markets. In light of improved credit performance and cost management, the company expects its 1HFY21 cash NPAT to be ahead of its 1HFY20 performance of $34.5 million. The company expects its cost to income ratio to reach 40% by the end of FY22.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock has provided a return of 13.9% in the past one month and is currently trading lower than the average 52-weeks price level band, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$0.82 and resistance of ~$1.45. We have valued the stock using the price to earnings multiple based illustrative relative valuation method and have arrived at a target price of low double digit-upside (in percentage terms). For the purpose, we have taken peers Smartgroup Corporation Ltd (ASX: SIQ), Credit Corp Group Ltd (ASX: CCP), and Eclipx Group Ltd (ASX: ECX), etc. Considering the company’s decent performance in Q1FY21, modest outlook, and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current price of $1.270, up by 12.389% on 20 November 2020. The recently announced strategic partnership with Mastercard could be the reason behind the intraday rise in the stock price.

SciDev Limited

Q1FY20 Result Highlights: SciDev Limited (ASX: SDV) is primarily involved in the development and application of both chemistry and process control for solids-liquid separation. As on 20 November 2020, the company’s market capitalisation stood at $127.10 million. For Q1FY20, the company reported record quarterly sales of $9.4 million, representing a growth of 755% on the previous corresponding period (pcp). The total cash receipts for the quarter stood at $5.6 million, compared to $1.5 million in pcp. The unaudited net profit for the quarter stood at $0.5million. For FY20, the company had reported revenue of $18 million, up 518% on FY19. Over the last one year, the company has generated its growth through targeted business development. As at 30 September 2020, the company had a cash balance of $5.6 million.

Revenue and Cash Receipts Trend (Source: Company Reports)

Outlook: The company currently has a decent growth pipeline and is well-positioned to deliver sustainable growth in solid-liquid separation. Currently, the company is focused on implementing business development & cost controlling initiatives. The company believes that there is a significant opportunity for growth in fine particle separation chemistry which is an US$11 billion sector within the broader US$100 billion global commodity chemistry market.

Stock Recommendation: The stock of SDV has provided a return of 19.86% in the last six months and is currently inclined towards its 52-weeks high price of $0.950. On the technical analysis front, the stock has a support level of ~$0.83 and resistance level of $0.910. On a TTM basis, the stock has a price to book value multiple of 7.3x, higher than the industry median (Professional & Commercial Services) of 2.4x, demonstrating that the stock might be overvalued. Hence, considering the company’s current trading levels and TTM valuation, we give an “Expensive” rating on the stock at the current market price of $0.900, up by 7.784% on 20 November 2020.

88 Energy Limited

Announced Placement of $10 Million: 88 Energy Limited (ASX: 88E) is an oil and gas exploration company with a market capitalisation of ~$71.48 million. On 18 November 2020, the company announced that it has completed a bookbuild to domestic and international institutional and sophisticated investors to raise up to A$10.07 million before costs through the issue of up to ~1.678 million fully paid ordinary shares of the company at an issue price of A$0.006 per share. The proceeds raised from the placement will be used to fund the ongoing evaluation of the conventional and unconventional prospectivity of the company’s existing assets, and for identifying and exploiting new opportunities on the North Slope of Alaska.

September 2020 Quarter Results: During the September quarter, the company spent $1.2 million on exploration and evaluation activities. This includes expenditure on the Charlie-1 post well testing as well as Project Peregrine well planning and permitting. Lease rental payments during the quarter totalled at $0.389 million. During the quarter, the company acquired remaining shares and listed options in XCD Energy having reached over 90% of acceptances in the Offers. Net cash outflow from operating activities stood at $1.14 million.

Q3FY20 Operating Cash Outflow (Source: Company Report)

Focus Areas: The company is preparing for the drilling of the Merlin-1 and Harrier-1 wells, which will test multiple conventional targets, in Q1 CY2021. At Yukon Acreage, the company is continuing discussions with nearby resource owners to optimise the monetisation strategy of the acreage, with permitting continuing for future potential exploration drilling.

Stock Recommendation: The stock of 88E has provided a return of 80% in the last three months, however, it is trading lower than the average 52-weeks price level band, offering a decent opportunity for accumulation. On a technical analysis front, the stock has a support level of ~$0.006 and resistance of ~$0.012. On a TTM basis, the stock is trading at a price to book value multiple of 1.1x, lower than the industry average of 3.8x, demonstrating that the stock might be undervalued. Considering the company’s recent placement of $10 million, current trading levels and TTM valuation, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.008, on 20 November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: 88 Energy 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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