Stocks’ Details

Bingo Industries Limited

Strong operational growth coupled with robust EBITDA margins: Bingo Industries Ltd (ASX: BIN) provides end-to-end environmental and waste management solutions across the waste management supply chain. It offers front and rear lift commercial waste bins and compactors to handle waste such as general waste, paper, cardboard, and co-mingled recyclables, as well as provides solutions for liquid waste such as oily waters, grease traps, wash waters, and chemicals. Recently, the company presented its business prospect in Annual General Meeting and highlighted about FY18 activity and its future prospects. As per the release, the company has outperformed against its own FY2018 guidance and posted a strong EBITDA of $93.7 Mn exhibiting a rise of 46% on a Y-O-Y basis. Based on robust performance in FY17 and FY18, the company has set a target to become a market leader in terms of sustainability in the recycling and waste industries. EBITDA margin stood at 30.8% in FY18, showing an increase of 30 bps over the prior year. This strong growth was driven by enhanced operating footprint in New South Wales and Victoria, favourable demographics along with robust construction activity incurred during the year. Proforma NPAT before amortization of acquired intangibles came in at $48.2 Mn in FY18, indicating a rise of 44.8% on a Y-O-Y basis, hence this shows that the company was efficient enough to translate the growth in sales into earnings.

Besides this, the company achieved 85% recovery rates which was up 10% from 75% in FY2017. Going forth the company has stated its FY 2019 guidance of Proforma EBITDA growth of 15-20%, this fall in the guidance is considering the fact that the FY2019 is going to be a transitional year for the company as a number of facilities will be offline for redevelopment.   

Meanwhile, the stock price has fallen over the past one month by 14.76%, also if we look at the YTD performance, the stock is down by a modest 8.12%, thus demonstrating a below par performance. Although there are numerous positive factors such as strong operational performance in FY18 that would ensure better value to shareholders, we presume that at the current level, the price has discounted all the positive developments. We, therefore, recommend the investors to keep a watch on the stock as growth catalysts and new developments might trigger a rally in the share. The stock last traded at $ 2.330.

Baby Bunting Group Limited

Strong FY 2019 guidance and prospects of gaining an enhanced market share: Baby Bunting Group Ltd. (ASX: BBN) operates as a nursery retailer and one-stop-baby shop in Australia. The Company offers prams, car seats, cots, nursery furniture, high chairs, change tables, portable cots, home safety, toys, feeding, monitors, baby wear, and related products. The company is Australia’s largest specialty baby goods retailer with a market cap of $256.68 Mn as on November 15, 2018. For the FY2018, the company’s total sales were $303.1 Mn exhibiting a growth of 9% on PCP. The company achieved a growth in the gross profits of 5.9%, and it stood at $100.9 Mn. The results were flat on account of price deflation through the Australian retail market hence affecting margins which ultimately resulted in earnings and profits ending the year below the levels that were targeted.  Over the year, the company has increased its number of stores to 47 from 42 recorded last year and further plans to have 80 stores in the upcoming years.

As of now, the group focuses on expanding its range of private label, and exclusive products which will support the topline growth in years to come. This growth will come primarily from the support of its key suppliers expanding the range of their products sold exclusively through the baby bunting stores. Additionally, for FY19, the company expects the EBITDA to be in the range of $24-27 Mn which would result in a growth of 30-45% on Y-O-Y basis. This guidance is heavily based on the assumption that a firm will be able to capture & capitalize on a large proportion of market share which is created by the exit of its competitors.

Changes in market creating opportunities for BBN (Source: Company Reports)

Meanwhile, the stock price has fallen 17.81% in the past three months and traded at reasonable PE multiple of 29.4x. Considering the strong FY 2019 guidance and prospects of gaining an enhanced market share due to the exit of its competitors, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $1.960 (down 3.448% on November 15, 2018).

Cann Group Limited

Exponential growth in the medicinal cannabis market: Cann Group Ltd (ASX: CAN) produces and supplies medicinal cannabis in Australia. The company has a market capitalization of circa $348.99 Mn as on November 15, 2018. The company has posted its numbers citing its revenue at $1.503 Mn, and has reported a loss from ordinary activities after tax of $4.726 Mn on the back of high costs incurred on the R&D, cultivation and the product development base. As per the management commentary, these initial costs will lay the foundations for a robust and profitable business that will generate long-term value for the shareholders.

Growth Proposition: Going forth, we believe that the medicinal cannabis market is expected to reach US$ 100 Bn by 2025 with an estimated CAGR of ~30% on the back of Federal Government’s decision last January which allows Australian producers to access overseas export markets, and the growing number of countries moving to legalize medicinal cannabis. Also, the global medicinal market today is at some US$20 billion, with projections that it may reach approximately US$100 billion by FY 2025. The company has also announced plans to proceed with a major expansion program, involving the construction of state-of-the-art cultivation space, laboratories, and a full GMP manufacturing facility. Also, Project Tullamarine will be fully operational by the third quarter of 2020, with a capacity to produce around 40 to 50,000 kilograms of dry flower equivalent product, which’s going to put the company in a very strong position to serve the growing Australian market.

   
CAN’s key partners for Cannabis research (Source: Company Reports)

Meanwhile, over the period of past six months, the stock has receded by a drastic 33.51% and traded close to lower level. Thus, considering the prospective exponential growth in the medicinal cannabis market and the readiness of the firm to fetch the opportunities in the export market, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $2.520.

EML Payments Limited

High volatility among speculation: EML Payments Limited (ASX: EML) provides prepaid payment services in Australia, Europe, and North America. The company issues mobile, virtual, and physical card solutions for pay-outs, gifts, incentives and rewards, and supplier payments. It also offers supplier enablement, payment execution, program management, and other services. The company has a market capitalization of $380.02 million as of November 15, 2018. Recently, the company presented its business prospect in Annual General Meeting and highlighted about FY18 activity and its future prospects. As per the release, the company has seen a revenue expansion of 23% and reached $71.01 Mn in FY18. The company is currently managing 1200 card programs across 21 countries. Further, the company’s Gross debit volume (which indicates the number of payments processed on the platform) has reached $6.75 Bn a rise of 53% on a Y-O-Y basis. EBITDA grew by 43% and amounted to $20.38Mn in FY18 over the prior year. It was mainly driven by 114% and 86% rise in the GDV in Australia & UK/Europe region, respectively. Total overheads (including employment-related costs & other overheads) as a % of Revenue fell to 48% of revenue as the group continues to leverage its growing scale. The company has come up with a strong guidance for FY 2019 with the expected top-line in the range of $82-88 Mn and EBITDA in the range of $26-28 Mn, which represents a growth of 25-30% on pcp, on the back of contribution from major German malls customer ECE, and stable central bank interest rates.
 

EML’s 5 years’ EBITDA CAGR trend (in Mn) (Source: Company Reports)
Meanwhile, the period of past six months saw the stock moving up by about 25.62%. However, if we look at the YTD performance, the stock is down by 20.00%, thus the price trend indicates some volatility. Considering the volatile stock performance while there is annualized growth rate in EBITDA, we have a “Speculative Buy” rating on the stock at the current market price of $1.490.

iCar Asia Limited

Robust audience & listings growth: iCar Asia Ltd (ASX: ICQ) owns a portfolio of automotive websites in Malaysia, Indonesia and Thailand and an automotive magazine in Malaysia. The company has a market cap of $57.39 Mn as on November 15, 2018. The company via the ASX release dated October 9, 2018 declared its Q3 numbers stating that it has achieved a revenue of $3 Mn, reflecting a growth of 51% Y-o-Y. Cash receipts from customers have grown 46% to reach at $3.2 Mn, also the firm’s Malaysia operations became cash flow & EBITDA positive for the first time. Such operational performance was achieved on the back of continued strong growth in core businesses in Used and New Car. For New Car, retimed events and media campaigns were successfully executed in Q3 FY18. 

Growth Proposition: Going forth, the company’s Thailand operations are on track to achieve the break-even in Q4 2018 as the audience is growing at 88% Y-O-Y & listings continue to grow at 6%. Also, the digital transformation is gaining traction across the Asian markets & its set to be a more than US$ 200 Bn market till 2025.

Meanwhile, the stock price has fallen drastically by 26.83 % over the past one month, thus offering low levels. Considering the growing consumer discretionary spending and growing disposable income coupled with its phenomenal audience growth, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.140.


 
Stock Price Comparative Chart (Source: Thomson Reuters)
 
 
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