Stock’s Details
 

City Chic Collective Limited

Strong Growth in Online Sales: City Chic Collective Limited (ASX: CCX) is engaged in the retailing of women’s fashion products. The market capitalisation of the company stood at $489.07 Mn as on 25^th May 2020. Recently, the company has notified the market with an update in relation to COVID-19 and stated that it has commenced a staged re-opening of its stores in Australia and New Zealand. This follows the ease provided in relation to COVID-19 restrictions by the Government of Australia and New Zealand. The company reported strong growth of 57% in online sales during the stores closure period. CCX achieved this growth by rapidly moving to adjust its product mix to better suit the customers need during these times.

The company added that it has driven working capital efficiencies, deferred non-essential capital expenditure and decreased costs throughout the head office as well as in the store-driven activity over the past eight weeks.  The below picture gives an overview of revenue by channel during 1H FY20:


Revenue by Channel (Source: Company Reports)

Future Focus:  City Chic Collective Limited is on track to achieve positive comparable sales growth for FY20. The focus of the company is on the execution of growth initiatives like reinvigorating the avenue brands to deliver segment expansion.

Stock Recommendation: The company is in a robust financial position with minimal debt and significant headroom in its $40 million debt facility. The reactive and flexible supply chain of the company places the business in a decent position to manage its working capital during this COVID-19 crisis. The stock of CCX has provided a return of 32.61% during the last one month. Hence, considering the strong financial position, focus of the company on execution of growth initiatives, robust growth in online sales during the crisis, re-opening of stores in ANZ and working capital efficiencies, we give a “Hold” recommendation on the stock at the current market price of $2.820 per share, up by 15.574% on 25^th May 2020.

Mosaic Brands Limited

Re-Opening of Stores: Mosaic Brands Limited (ASX: MOZ) is involved in the retailing of women’s apparel and accessories. The market capitalisation of the company stood at $78.9 Mn as on 25^th May 2020. The company recently announced the progressive reopening of its retail fashion stores over the coming months as a result of trial openings. The trial openings have enabled MOZ to gain valuable insights into changes in customer shopping habits, store revenues and centre foot-traffic. During the past six weeks, the company experienced a substantial increase in online sales of over 80%, which was supported by the strength of its nine brands and increased investment in its digital strategy. This performance indicates the substantial work during this challenging time to accelerate its strategy to expand the range of products offered and grow customer acquisition. The following picture provides an overview of the company’s financial performance:


Key Financials (Source: Company Reports)

Expected EBITDA Losses: For FY20, the company expects to report EBITDA loss due to material decline in foot traffic through March 2020 because of the impact of COVID-19 as well as the subsequent six-week closure of its stores, coupled with their progressive reopening and the anticipated gradual recovery in customer demand. 

Stock Recommendation: Net margin of the company stood at 2.8% in 1H FY20, reflecting YoY growth of 0.7%. This implies that the company has improved its capabilities to convert its topline into the bottom line. MOZ has an EV/Sales multiple of 0.3x as compared to the industry average (Consumer Cyclicals) of 2.7x on TTM basis. The stock of Mosaic is trading at a price to cash flow multiple of 1.9x against the industry average (Consumer Cyclicals) of 7.2x on TTM basis. The stock has corrected by 54.60% and 68.29% during the last three months and six months, respectively and is inclined towards its 52-week low level of $0.195, offering decent opportunities to accumulate. Thus, it can be said that the stock is undervalued at the current juncture. Therefore, in light of the strength of its nine brands and increased investment in digital strategy, robust growth in online sales and expected EBITDA losses for FY20, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.850 per share, up by 4.294% on 25^th May 2020. 
 

Holista Colltech Limited

Appointment of Exclusive Distributor for Natshield™: Holista Colltech Limited (ASX: HCT) is a bio-industrial company, which is committed to the development and commercialisation of food ingredients and ovine collagen for cosmetic and biomedical applications. The market capitalisation of the company stood at $39.93 Mn as on 25^th May 2020. Recently, the company has filed a global patent application for a Natshield™ nasal balm sanitiser. It added that this balm will contain Path-Away®, the plant-based anti-pathogenic solution, as the active ingredient. In another update, the company announced that it has appointed OOH Medical Ltd as exclusive distributor for the Natshield™ sanitiser products for the United Kingdom for an initial term of 3 years. The minimum orders for the first year are likely to be negotiated in the coming weeks.

The March 2020 quarter has been a busy and successful one for the company. Growth in sales of Natshield^TM has opened during the quarter with the outbreak of Covid-19. The company has raised $4.33 million by utilising the Controlled Placement Agreement during the quarter. HCT reported total cash inflow of $1,989,000 from customers during the same period.


Cash Flows (Source: Company Reports)

Outlook: HCT is committed to establish Natshield^TM as the preferred natural sanitiser globally, while maintaining its core activity and markets for all its products.

Stock Recommendation: The increased activity around Natshield^TM has led HCT to procure fresh funds, cement its Board and Governance and introduce greater depth to the Scientific Advisory Board, securing control over the global rights to the application of Path-Away® in sanitising lotions and balms, building new distribution networks, new partnerships, and field a number of inquiries from stakeholders and potential opportunities. The stock of HCT is trading at a price to book multiple of 7.6x as compared to the industry average (Biotechnology & Medical Research) of 4.7x on TTM basis. The stock is trading slightly above the average of its 52-week trading range of $0.037 - $0.275.  Therefore, considering the expected negotiation for the minimum orders of Natshield^TM in the coming weeks, current trading levels and uncertainty in the market, we have a wait and watch stance on the stock at the current market price of $0.155 per share, up by 6.897% on 25^th May 2020.


Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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