Stocks’ Details

Bingo Industries Limited

Cost Synergies Expected from Integration of Dial a Dump: Bingo Industries Limited (ASX: BIN) provides recycling and waste management solutions with capabilities across waste collections, processing, separation and recycling components of the waste value chain. At the Annual General Meeting of the company, the top management addressed the shareholders and stated that the acquisition of Dial a Dump materially transformed the business and expects to achieve cost synergies of $15 million over two years. The integration of DADI (Dial a Dump) is expected to be completed by June 2020. Another recent announcement notified that Richard England resigned from the position of Director with effect from 13 November 2019.

Financial Performance: During the year ended 30 June 2019, net revenue of the company increased to $402.2 million, from $303.8 million in FY18 and witnessed a CAGR (Compounded Annual Growth Rate) of 38.3% during the time span of 3 years, i.e., FY17 to FY19. Operating free cash flow of the company also reported decent growth and went up from $88.9 million in FY18 to $116.5 million in FY19. During the year, underlying EBITDA (Earnings before Interest, Taxes, Depreciation and Amortisation) of the company went up by 13.2%, from $93.7 million to $106.1 million.


Financial Performance (Source: Company Reports)

What to Expect: BIN expects to achieve decent YoY growth in FY20, underpinned by a full-year contribution from Patons Lane Recycling Centre and Landfill, West Melbourne Recycling Centre and DADI. It also expects underlying EBITDA to be in the range of $159 million - $164 million, with earnings slightly skewed to 2HFY20, due to the development activity including Patons Lane advanced recycling equipment installation in 2QFY20, a potential extension to West Melbourne operating hours in 4Q FY20 and Mortdale operational in 4QFY20.

Stock Recommendation: As per the ASX, the stock of BIN generated a return of 32.46% in the past six months and YTD returns from the stock stood at 38.63%. Gross margin of the company stood at $53.2% as compared to the industry median of 39%, indicating that the company is able to manage its costs efficiently. Considering the performance in FY19, decent EBITDA guidance, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $2.800, up 10.672%, on November 13, 2019, on account of FY20 market update.
 

EML Payments Limited

EML’s Share Price Surged Over 13% Post AGM results and Issue Completion Updates:EML Payments Limited (ASX: EML) is involved in the provision of prepaid payment services in Australia, Europe, and North America.The company recently notified that it has completed its placement and institutional entitlement offer, raising around A$67 Mn through the placement and ~A$89 Mn via the Institutional Entitlement Offer, at a price of A$3.55 per share.Retail Entitlement Offer is expected to open on November 18, 2019, to raise an additional amount of A$91 Mn. Proceeds from the issue are expected to be used for acquisition of Prepaid Financial Services (Ireland) Limited (PFS), a multi-award winning European provider of white label payments and banking-as-a-service technology.

 
FY19 Income Statement (Source: Company Reports)

FY19 Key Highlights for the period ended June 30, 2019:Revenue for the period exceeded FY19 guidance of $88-94 Mn, and was reported at $97.2 Mn, an increase of 37% over the previous corresponding period. Group Gross Debit Volume increased by 34% to $9.03 Bn. EBITDA for the period increased by 40% to $29.1 Mn, which included acquisition expenses of $0.6 Mn. NPAT for the period increased by 283% to $8.5 Mn.Operating cash inflows for the period were reported at $22.0 Mn, excluding one-time benefit of $7.1 Mn in accelerated breakage cash receipts. Cash on hand at the end of the period was reported at $33.1 Mn. The company also had a loan amounting to $15.0 Mn with a major Australian bank.

Stock Recommendation:EML’s stock generated a whopping YTD return of 155.33%. Its gross margin for FY19 stood in-line with FY18 result of 75.1%. Its EBITDA margin and net margin for FY19 stood at 24.6% and 8.7%, better than FY18 results of 20.7% and 3.1%, respectively, indicating improvement in the company’s fundamentals. Its debt to equity multiple for FY19 stood at 0.10x, lower than the industry median of 0.56x. The company’s gross debt volume will continue to grow in FY20, with the acquisition of Flex-e-Card, which added 226 malls to its European portfolio.Hence, considering the recent capital raising, subsequent acquisition planning, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $4.350, up 13.577% on November 13, 2019, taking cues from the outcome of AGM 2019.
 

Afterpay Touch Group Limited

Underlying Sales Increased Substantially:Afterpay Touch Group Limited (ASX: APT) is involved in providing technology-driven payment solutions for customers and businesses through its Afterpay and Pay Now services and businesses. Recently, the company published business updates for the four months ended October 31, 2019, where it highlighted that the underlying sales increased by 110% to $2.7 Bn, as compared to the previous corresponding period.Active Customers as on October 31, 2019 were reported at 6.1 Mn, representing an increase of 137% on the previous corresponding period. The company onboarded 15K new customers per day in October, up from around 12.5K customers per day in July.

Active Merchants as on October 31, 2019, were reported at 39,450, an increase of 96% on pcp. Some of the major brands are eBay (AU), Ulta (US), Finish Line (US), Marks & Spencer (UK), David Jones (in-store AU), and Myer (in-store AU). The company has entered into a subscription agreement for an A$200 Mn private placement with leading US-based technology investor, Coatue. Proceeds from this partnership will be targeted to global platform expansion opportunities beyond midterm plan deliverables.

In another update, the company informed that Gary Briggs will be joining the Company as a Non-Executive Director from 1 January 2020.

 
Key Metrics (Source: Company Reports)

Stock Recommendation:APT’s share generated a decent YTD return of 143.25%. Its gross margin for FY19 stood at 77.4%, better than the industry median of 76.2%. Its current ratio for FY19 stood at 5.78x, better than the industry median of 2.81x. Its debt to equity ratio for FY19 stood at 0.08x, lower than the industry median of 0.56x. Hence, considering the company’s decent four months sales performance, partnership with important brands, decent price movement on YTD basis and current trading levels, we suggest investors to adopt a wait and watch stance on the stock at the current market price of $29.370, up 0.617% on November 13, 2019.
 

Starpharma Holdings Limited

VivaGel® BV Launched in the UK:Starpharma Holdings Limited (ASX: SPL) is involved in research, development and commercialisation of dendrimer products for the pharmaceutical, life-science and other applications. On November 13, 2019, the company informed the market that VivaGel® BV has been launched in the UK under the brand Betafem® BV Gel (BV- Bacterial Vaginosis). The product was launched by Mundipharma. This launch follows the first European launches in June 2019, including in Germany and other countries. Europe represents a large commercial opportunity for VivaGel® BV with access to more than 260 Mn women.

September’19 Quarter Key Highlights: Cash balance at the end of the quarter was reported at $36.8 Mn, with net operating cash outflows for the quarter amounting to $4.6 Mn. Receipts from customers for the quarter totalled $1.1 Mn, which includes launch/regulatory milestones, product supply and royalty receipts from partners for VivaGel® BV.


September’19 Quarter Operating Cash Flow (Source: Company Reports)

What to expect:The company has commenced its phase 1/2 clinical trial for DEP® irinotecan, which will be conducted at multiple sites, with initial sites already opened, including leading UK cancer centres. It has received first Asian regulatory approval for VivaGel® BV, which will facilitate and accelerate further registrations in Asia.

Stock Recommendation:SPL’s share generated a positive YTD return of 25.47%. Its gross margin for FY19 stood at 90.8%, better than the industry median of 64.9%. Its current ratio for FY19 stood at 7.44x, better than the industry median of 1.90x, which implies that the company is in a better position to repay its short-term obligations. Roll-out of VivaGel® BV into Europe as well as Australia, along with the first regulatory approval in Asia, is expected to boost shareholder’s value.Hence, considering the aforesaid facts and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $1.285, down 3.383% on November 13, 2019, pursuant to the launch of VivaGel BV in the UK.
 

Nanosonics Limited

Lisa McIntyre Appointed as Non-executive Director:Nanosonics Limited (ASX: NAN) is involved in the manufacturing and distribution of the trophon® ultrasound probe disinfector and its associated consumables and accessories. The company also engages in research, development and commercialisation of infection control and decontamination products and related technologies. Recently, the company announced a new issuance of 47,812 fully paid ordinary shares at $2.85 per share, as a result of the exercise of Options. 11,252 Performance Rights were also granted under the Nanosonics Omnibus Equity Plan. In another update, the company announced the appointment of Lisa McIntyre as a Non-executive Director, effective December 13, 2019.

 

FY19 Revenue Data (Source: Company Reports)

FY19 Key Highlights for the period ended June 30, 2019:Revenue for the period stood at $84.3 Mn, up 39% on prior corresponding period. Capital revenue for the period increased by 28% to $32.8 Mn. Operating profit before tax for the period increased by 201% to $16.8 Mn. Cash and cash equivalents at the end of the period were reported at $72.2 Mn. Geographically, the company expanded into new markets, including Norway, Denmark, Finland, Spain, Portugal, Switzerland and Israel, through distribution agreements. During the year, the 2^nd generation trophon, trophon2, was successfully launched, receiving positive customer feedback.

Stock Recommendation:NAN’s stock generated a decent YTD return of 145.68%. Its gross margin for FY19 stood at 74.5%, better than the industry median of 70.8%. Its EBITDA margin and net margin for FY19 stood at 18.7% and 16.1%, better than FY18 result of 7.1% and 9.5%, respectively. Its ROE for FY19 stood at 13.3%, better than the industry median of 10.6%. Its current ratio for FY19 stood at 6.80x, better than the industry median of 2.47x. However, on the valuation front, EV/Sales multiple on TTM basis stands at 21.4x, higher than the industry median of 8.4x, indicating overvalued position at the current juncture. Currently, the stock is trading towards the upper band of its 52-week trading range of $2.65 to $7.21 with PE multiple of 150.44x. Hence, considering the aforesaid facts and current trading levels, we recommend an “Expensive” rating on the stock at the current market price of $6.990, up 2.343% on November 13, 2019.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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