AMA Group Limited 

Change in Shareholding Update: AMA Group Limited (ASX: AMA) engages in the automotive aftercare and accessories market that offers motor vehicle panel repair services, manufactures motor vehicle protection products, and distributes automotive electricals. Recently, AustralianSuper Pty Ltd and Mittleman Investment Management, LLC and its associates, substantial holders have increased its holding to 102,121,099 shares with voting power of 11.50% and 114,464,158 shares with voting power of 12AMA Group Limited (ASX: AMA) engages in the automotive aftercare and accessories market that offers motor vehicle panel repair services, manufactures motor vehicle protection products, and distributes automotive electricals. .88%, respectively.

The director, Kyle Loades, has undergone a change and acquired 10,956 ordinary shares of the company for a consideration of $0.4525 per share.

FY21 Financial Performance:

• The company has recorded revenue growth of over 11% to $919.9 million in FY21, compared to $825.4 million in FY20, largely due to the benefit of full twelve-month trading for acquisitions such as Capital S.M.A.R.T and ACM Parts.
• It reported an improved pre-AASB 16 EBITDAI of 67.8% to $54.40 million in FY21 against $32.42 million in FY20.
• However, the company has reported an increase in its net loss to $99.07 million in FY21 vs loss of $71.46 million in FY20, impacting vehicle repair volume during the COVID-19 pandemic.
• The cash position of the company stood at $64.20 million of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- Due to low demand, economic slowdown and travel restrictions has impacted the company's operations, and still, the uncertainty prevails.
• Liquidity Risk- The company requires sufficient liquidity to meet its financial obligations, operational activity, offer more lending to clients and mitigate the working capital risks.

Outlook:

• The Banking syndicate remains supportive and have agreed to covenant waivers through to 31 December 2021. In addition, it proactively undertakes capital markets initiatives to enhance balance sheet flexibility, diversify funding sources and extend the duration.
• The company expects a rise in domestic driving in holidays due to the closure of international borders, leading to an increase in mobility that might positively impact business.
• The company continues to focus on operational efficiencies and cost management that might leads to higher margins.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Recently, the company has announced the successful settlement of the A$50 million senior unsecured convertible notes due in March 2027. The stock of AMA is trading below its average 52-weeks' levels of $0.383-$0.870. The stock of AMA gave a positive return of ~9.40% in the past one month and a negative return of ~27.34% in the past one year. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the uncertainty of COVID-19 pandemic and a negative net margin performance. For the purpose of valuation, peers such as Autosports Group Ltd (ASX: ASG), Eagers Automotive Ltd (ASX: APE), GUD Holdings Limited (ASX: GUD) have been considered. Considering the current trading levels, indicative upside in valuation, government grants, increase in domestic travel, efficient cost management, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.450, down by ~2.17% as on 29 September 2021.

AMA Daily Technical Chart, Data Source: REFINITIV 

MyDeal.com.au Limited

FY21 Financial Performance: MyDeal.com.au Limited (ASX: MYD) is an e-commerce platform to shop home, garden products that include kitchenware, pet products, bed, and bath products. It also offers baby products, health and beauty products etc., in Australia.

• The company has recorded a robust revenue from contracts with customers and it grew by 149.56% to $38.27 million in FY21, compared to $15.33 million in FY20, driven by an increase in active customers by 83.1% during the year.
• It delivered an increased sales by 07% to $218.06 million in FY21, reflecting an increase from $103.31 million in FY20, driven by continued growth in the Groups active customer base.
• The company reported a decline in EBITDA by 701.59% to $4.02 million in FY21 against a profit of $669k in FY20 due to a planned increase in advertising and promotional activity.
• However, the company has reported a net loss of $5.85 million in FY21 against a profit of $849k in FY20, impacted due to focused customer acquisition and investment in the private label business.
• The cash position of the company stood at $42.67 million as of 30 June 2021 vs $16.80 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Liquidity Risk- The company requires adequate cash reserve to meet the financial obligation, operational activity and mitigate the working capital risks.
• Interest rate risk- The company is also exposed to interest rate risk. Therefore, any change in interest rate could impact the finances of the company.

Outlook:

• The company focuses on enhancing its strategic customer acquisition and expanding its private-label business during FY22.
• The experts anticipate an increase of 37.5% in Australia's online household goods market from 2020 to 2025.
• The company enhances its focus on affordable and best value offers range in home and lifestyle products and further invests in the loyalty program, building brand and enduring the relationship with sellers and suppliers.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MYD is trading below its average 52-weeks' levels of $0.520-$2.200. The stock of MYD gave a negative return of ~16.28 % in the past six months and a positive return of ~1.736% in the past one month. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the economic slowdown and a negative net margin performance. For the purpose of valuation, peers such as Kogan.com Ltd (ASX: KGN), Temple & Webster Group Ltd (ASX: TPW), Adore Beauty Group Ltd (ASX: ABY) have been considered. Considering the current trading levels, indicative upside in valuation, enhancing its marketing strategy, robust sales growth in FY21, investing in customer acquisition, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.725, down by ~2.03% as on 29 September 2021.

MYD Daily Technical Chart, Data Source: REFINITIV

5G Networks Limited

FY21 Financial Performance: 5G Networks Limited (ASX: 5GN) provides telecommunication services that include data connectivity, cloud, and data centre, and managed services. It also engages in domain name registrations website, email hosting, and social advertising campaigns for businesses in Australia.

• The company has recorded a robust revenue and other income of $91.69 million in FY21, compared to $49.76 million in FY20 driven by webcentral (Email & Hosting) domain revenue.
• The company has delivered a strong underlying EBITDA performance of $15.5 million during the period, reflecting significant operational synergies within the Webcentral business.
• It received cash receipts of $95.24 million in FY21 vs $53.59 million in FY20.
• However, the company has reported a loss of $5.86 million in FY21 against a loss of $1.54 million in FY20, impacted by the WCG acquisition and other acquisitions totalling $3.9 million.
• At the end of the period, the cash position of the company stood at $19.17 million as of 30 June 2021, down from $22.11 million as of 30 June 2020.

Operating Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Compliance Risk- The company is exposed to compliance risk regarding its Cloud Computing Arrangements that could impact the company's operations.

Outlook:

• It remains focused on strengthening the core business with strategic digital leadership, innovation, exceptional customer experience, improving operating cashflows, and restoring its capital structure.
• The company is proactively supporting customer requirements and significantly increasing the network and internet capacity.
• The group expects increased demand for network and data centre services. Further, its strategies to build its brand image, several high-profile mergers and asset acquisitions.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of 5GN is trading below its average 52-weeks' levels of $0.850-$1.920. The stock of 5GN gave a positive return of ~3.66 % in the past one week and a negative return of ~43.48% in the past one year. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the uncertainty of the COVID-19 pandemic and a lower gross margin. For the purpose of valuation, peers such as Spirit Technology Solutions Ltd (ASX: ST1), Superloop Ltd (ASX: SLC), MNF Group Ltd (ASX: MNF) have been considered. Considering the current trading levels, indicative upside in valuation, strategic brand building image, government grants, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.890, as on 29 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

5GN Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.