Sunland Group Ltd

SDG Details

FY20 Results Highlights: Sunland Group Limited (ASX: SDG) is engaged in the business of residential property development and construction. As on 12 October 2020, the market capitalization of the company stood at ~$190.30 million. In FY20, the company reported statutory net profit of $2.4 million, significantly down by 86% year over year due to inventory adjustments of $13.9 million incurred over the period. In the same time span, the revenues stood at $167.2 million, as compared to $282.7 million in FY19. The company declared fully franked final dividends of 10 cents per share, which consists of a final dividend of 7 cents per share and a special dividend of 3 cents per share, paid in September 2020. During FY20, Sunland acquired new sites in maraylya (NSW) for $6.8 million and acquired 4.1 million shares under the buyback program, which has a total value of $6.5 million. The company exited the period with decent balance sheet capacity with a cash balance of $13.1 million with $139 million of undrawn working capital.

FY20 Results (Source: Company Reports)

Outlook: In response to COVID-19, the management has aligned its administration costs and operational requirements according to group’s activity. Furthermore, the company is looking forward to disposing of assets which are at a premium to realize and inherent value to balance sheet. The company recently advised that it is going to hold an election of Directors at its 2020 Annual General Meeting (AGM) which is expected to occur on 27 November 2020.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: As per ASX, the stock of SDG gave a return of 14.90% in the past six months and a return of 27.32% in the last three months. On a technical front, the stock of SDG has a support level of ~1.276 and a resistance level of ~$1.477. We have valued the stock using the Price to Earnings multiple based illustrative relative valuation and have arrived at a target upside of low-double digit (in % terms). For the purpose, we have taken peers like Stockland Corporation Ltd (ASX: SGP), Dexus (ASX: DXS) and 360 Capital Group Ltd (ASX: TGP). Considering the attractive returns in the past six months, and decent long-term outlook, and valuation, we recommend a 'Speculative Buy’ rating on the stock at the current market price of ~$1.385, down by 0.36% on 13 October 2020.

SDG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Sandon Capital Investments Ltd

SNC Details

FY20 Financial Highlights: Sandon Capital Investments Ltd (ASX: SNC) is an Australia based investment company with a market capitalization of ~$77.66 million as at 13 October 2020. For the year ended 30 June 2020 or FY20, the company reported negative revenues of $7.6 million, down by 667% on y-o-y basis, mainly due to the impact of COVID-19 pandemic on the capital market. In the same period, the company saw a fall of 4,195% in Net loss after tax to $8.6 million. Also, the company issued 46.5 million of fully paid SNC shares to acquire 227 million of shares in MVT. During FY20, the company reported a healthy balance sheet with a substantial cash and cash equivalents value of $2.1 million and cash outflow from operations of negative $7.9 million.

FY20 Results (Source: Company Reports)

August 2020 Highlights: During the month of August, the company’s portfolio grew by 10.2% and outperformed All ordinaries Accumulation index by 3.7%. Since inception to August 2020, the company’s portfolio has provided a return of 7.6%. The company intends to pay a final fully franked dividend of 2.5 cents per share on 12 November 2020. As at 31 August 2020, NTA after tax stood at $0.8388 per security.

Outlook:  The company is focusing on building positions in all three new core positions (one at Boral Ltd). Furthermore, the company is looking forward to identifying investment opportunities in outlooked sectors and companies. The company is going to hold a virtual meeting on 15 October 2020. 

Stock Recommendation: As per ASX, the stock of SNC gave a return of 16.93% in the past six months and 22.88% in the past three months. Currently, the stock is inclined towards its 52 weeks high price of $0.875. On the technical analysis front, the stock of SNC has a support level of ~$0.626 and a resistance level of ~$0.744. Considering the above-mentioned factors, the stock is trading close to its 52-week high level, and weak financial results we recommend an ‘Expensive’ rating on the stock at the current market price of $0.725, up 1.398% on 13 October 2020.

SNC Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Pioneer Credit Ltd

PNC Details

ASX Query to Pioneer:  Pioneer Credit Ltd (ASX: PNC) is a financial services provider in Australia specialized in acquiring and servicing of unsecured retail debt portfolios. Also, the company is involved in the sale of non-core portfolios, brokering and introducing credit products. Over the last two days, the company has witnessed significant increase in its share price, prompting ASX to raise a price query. In a response to ASX price query, the company has informed that it is not aware of any information that has not been announced which could explain the recent trading in its securities.

Acquisition of shares: On 1 October 2020, the company announced that it is going to acquire fully paid ordinary shares in market to satisfy performance and indetermine rights that have vested/will vest on or after 1 July 2020 under the Performance Rights Plan.

Completion of Refinancing Of Senior Finance Facilities:  The company recently announced that it has reached financial closure of senior Syndicated Facility Agreement (SFA) and refinanced the company senior debt facility with Carlyle. This will help the company in acquiring ‘above expectation’ portfolio opportunities.

FY20 Financial Highlights: During FY20, the group reported revenue from ordinary activities of $55 million, down 25% on y-o-y basis, mainly due to Covid-19 led headwinds on the economic condition of the markets. During the year, the company undertook initiatives to refinance senior debts and medium-term loans in order to strengthen the position of the company to secure better market opportunities, a continuation of customer support operations and changing workplace environment.

FY20 Results (Source: Company Reports)

Outlook:  The company is expecting PDP volumes to grow in Australia after the exit of the pandemic. Pioneer longstanding relationships with banks and one of the market leading compliance record would provide a strong competitive advantage in the market.

Stock Recommendation: As per ASX, the stock of PNC gave a return of 66.07% in the past six months and 63.1% in the last one month. On the technical analysis front, the stock of PNC has a support level of ~$0.26 and a resistance level of ~$0.53. For FY20, the stock’s debt to equity multiple of 3.35x, higher than the industry median 2.45x. On a TTM basis, the stock of PNC is trading at a price to book multiple of 0.5x, lower than the industry median (financials) of 1.1x. Considering the recent volatility in the stock prices, lack of financial flexibility & weak financial performance in FY20, we recommend a ‘Avoid’ rating on the stock at a current market price of $0.465 on 13 October 2020.

PNC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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