VIP Gloves Ltd

VIP Details

Announcement of Dividend Policy: VIP Gloves Ltd (ASX: VIP) is engaged in the production of single-use nitrate gloves for the medical industry. Market capitalisation of the company stood at ~$58.16 million as on 14th December 2020. Following the Board’s approval, the company announced a dividend policy of 20% to 40% of earnings before significant items, which is subject to its financial position. The dividend policy is effective on an immediate basis, and as a result, the company is seeking to declare its maiden dividend after finalising the consolidated financial statements for 1HFY21. In another update, the company notified that its order book has been improved and is currently full for delivery to end 2021. The company also provided clarification on the news that numerous glove factories in Malaysia were being shut down because of workers contracting COVID-19. The company has stated that it has not witnessed a single positive case of COVID-10 in its factory and the production is continuing at a normal level.

September Quarter Highlights: For the quarter ended 30^th September 2020 (Q1 FY21), the company reported a rise of 21% in nitrile glove production to 134 million pieces from 111 million pieces in Q4 2020. In addition, the company recorded an EBITDA growth of 340% as compared to Q4 FY20. The net cash from operation stood at $1.4 million, reflecting a rise of 36.6% because of its continued cost savings efforts which witnessed a fall of 48.9% in key operating expenses like administrative and staff cost.

Key Financials (Source: Company Reports)

Outlook: As a result of increased demand, the company has experienced a continuous rise in Average Selling Prices (ASP) in the last few months. Hence, it expects a rise of 50% in ASP for December 2020 quarter as compared to ASP of USD50 per 1,000 pieces in September 2020 quarter.

Stock Recommendation: The company ended September 2020 quarter with a cash equivalent to A$2.2 million. Current ratio of the company stood at 0.63x in FY20 as compared to 0.25x in FY19. This indicates the company has improved its position to settle short-term obligations.  In the last three months, the stock has corrected 14.77%, respectively. As a result, the stock is trading towards its 52-week low level of $0.029, offering decent opportunities for accumulation. On a technical analysis front, the stock has a support level of ~$0.061 and a resistance level of ~$0.092.  Thus, considering the recent announcement of dividend policy, rise in production and cash receipts and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.074 per share, down by 5.129% on 14^th December 2020.

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

Cann Global Limited

CGB Details

Repayment of Liabilities: Cann Global Limited (ASX: CGB) is engaged in the process of developing, growing, cultivating and producing hemp and medicinal cannabis products. The market capitalisation of the company stood at ~$45.82 million as on 14^th December 2020. Recently, the company announced it would clear all its liabilities, including large convertible noteholders by using a large portion of funds of $3.75 million raised from placement to sophisticated and professional investors. During September 2020 quarter, the company reached a Grant Agreement with Applied Cannabis Research for assisting the Cannabinoid Medicine Observational Study on hard pill cannabinoid formulations produced by Canntab facilitating early exposure to the Australian consumer. During the quarter, the company reported cash receipts from customers of $448k, reflecting a rise of 59% over the prior corresponding period. This growth was fueled by increased sales in the food division and the first cash receipts from Cann Global Thailand.  Subsequent to the end of the quarter, the company has also received an import permit to bring the Canntab cannabinoid hard pills to Australia, and it is expecting sales to commence in Q3 FY21.

Cash Flow (Source: Company Reports)

Outlook: Looking forward, the company is focused on generating a profitable business with new revenue channels in product areas of expected high demand.

Stock Recommendation: Current ratio of the company stood at 1.30x in FY20 as compared to 0.80x in FY19, which reflects that the company is well-positioned to address its short-term obligations.   In the last one month, the stock has provided a positive return of 58.33%. On a TTM basis, the stock is trading at a price to book value multiple of 5.2x as compared to the industry average (Pharmaceuticals) of 9.8x. On a technical analysis front, the stock has a support level of ~$0.004 and a resistance level of ~$0.02. Thus, considering the decent growth in cash receipts, healthy cash position, and valuation on TTM basis, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.009 per share, down by 10% on 14^th December 2020.

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

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