Temple & Webster Group Ltd

TPW Details

Change in Directors’ Interest: Temple & Webster Group Ltd (ASX: TPW) is engaged in online retailing of furniture and homewares. Recently, Stephen Heath has made a change to holdings in the company by acquiring 1,946 Restricted Rights at a consideration of $25,000.

FY21 Operational and Financial Highlights:

• During FY21, the company witnessed record growth of 85% and 141% in revenue and EBITDA to $326.3 million and $20.5 million, respectively, despite the challenges posed by the COVID-19 pandemic.
• FY21 was a cash flow positive year with a cash balance of $97.5 million at the end of the year.
• TPW commenced FY22 with decent YoY growth of 49% in revenue for the period 1 July – 27 August 2021.

Revenue & EBITDA Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Stiff Competition: The company’s operational and financial performance could be impacted by the rising market share of competitors and changing sentiments of the consumers.
• COVID-19 Disruptions: TPW is exposed to a risk arising from the uncertainties arising from the COVID-19 pandemic.

Outlook:

• Looking forward, the company would continue its reinvestment strategy, investing in growth areas of the business to enhance its online market leadership position.
• The company’s performance would be underpinned by the ongoing adoption of online shopping due to structural and demographic shifts, an increase in discretionary income due to travel restrictions and decent housing market growth.

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 TPW is trading below its 52-week low-high average of $8.010 - $15.000, respectively. The stock has been corrected by ~10.43% and ~20.95% in the past one month and three months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ average EV/Sales multiple, considering the growing earnings and housing market growth, etc. For the purpose of valuation, peers such as Redbubble Ltd (ASX: RBL), Adore Beauty Group Ltd (ASX: ABY) and Mydeal.Com Au Ltd (ASX: MYD) have been considered. Considering the expected upside in valuation, decent performance in FY21, strong start to FY22, decent outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the current market price of $9.840, as on 21 December 2021, 12:05 PM (GMT+10), Sydney, Eastern Australia.

TPW Daily Technical Chart, Data Source: REFINITIV 

Kogan.Com Ltd

KGN Details

Agreement for the Domain Sale: Kogan.Com Ltd (ASX: KGN) operates a portfolio of retail and services businesses which mainly includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, etc. As announced on 14 December 2021, the company has entered an agreement with Bitbuy, one of Canada’s largest crypto trading platforms. As per the terms of the agreement, the parent company of Bitbuy will acquire the domain name bitbuy.com from Kogan. As per the recent quarterly rebalance of the S&P/ASX Indices, KGN has been removed from S&P/ASX 200 Index, which became effective on 20 December 2021.

FY21 Operational and Financial Highlights:

• For the year ended 30 June 2020, the company recorded revenue amounting to $780.7 million, reflecting a rise of 56.8% over pcp.
• Gross Profit for the year amounted to $203.7 million, indicating a rise of 61% over $203.7 million in FY20.

Q1FY22 Financial Highlights: Backed by accelerating growth in Kogan First memberships, optimised inventory position, strong growth in Kogan Marketplace and Mighty Ape, KGN recorded decent growth in business during Q1FY22.

• Gross Sales rose by 21.1% to $330.5 million on a YoY basis and 23.2% on a QoQ basis. However, there was a fall of 1.7% in gross profit on a YoY but rose by 31.6% QoQ to $52.5 million.
• On a YoY basis, active customers witnessed growth of 30.7% to 3,351,000 for Kogan.com.

Gross Sales Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Demand & Supply Risk: The company’s business could be affected by disruptions in the demand and supply, which could ultimately impact its top line and bottom line.
• Changing Consumer Sentiments: KGN’s operational and financial performance could be impacted by the changing sentiments of consumers, which may affect its market share.

Outlook:

• For FY22, the company expects growth in Kogan First memberships, whereby the company is targeting a medium-term goal of 1 million members.
• The company would be focused on the integration of the Mighty Ape team and operations in FY22.

Valuation Methodology: P/E 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 KGN has been corrected by ~8.43% and ~13.61% in the past one and three months, respectively. The stock is currently trading lower than the 52-weeks’ average price level band of $7.200 - 21.890.  The stock has been valued using the P/E multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ average P/E multiple, considering the decent liquidity position and rising margins, etc. For this purpose of valuation, few peers like Booktopia Group Limited (ASX: BKG), Redbubble Limited (ASX: RBL), and Collins Foods Ltd (ASX: CKF) have been considered. Considering the expected upside in valuation, growing customer base, growth in gross sales and customers in Q1FY22, decent outlook, current trading level and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $8.250, as on 21 December 2021, 2:45 PM, (GMT+10), Sydney, Eastern Australia.

KGN Daily Technical Chart, Data Source: REFINITIV 

Carbon Revolution Limited

CBR Details

Supply of Carbon Fibre Wheels: Carbon Revolution Limited (ASX: CBR) is engaged in designing, manufacturing and marketing single-piece carbon fibre wheels. As announced on 27 October 2021, the company will supply the carbon fibre wheels that are featured on the Chevrolet Corvette Z06. The company has scheduled to start production on this wheel program in the early calendar year 2022.

Digging into Q1FY22 Financial and Operational Highlights:

• For the quarter ended 30 September 2021 (Q1 FY22), the company recorded revenue of $6.2 million and wheel sales of 2,100; both were in line with its expectations.
• Net cash outflow for the quarter stood at $23.4 million, which was in-line with the expectations. At the end of the quarter, the company had a cash balance of $63.9 million.
• The sales for new Ferrari programs have started and are tracking as per the plans of the company.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Competition from Peers: CBR’s operational and financial performance could be impacted by the rising market share of competitors, and as a result, its topline and bottom line could be hampered.
• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties, etc.

Outlook:

• The company believes that the customer orders and their forecast profile would continue to support a strong weighting of annual sales in 2HFY22.
• CBR’s mega-line project is on track, with key suppliers contracted, orders for long-lead time items placed, and detailed design nearing completion.

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 CBR is trading near to its 52-week low level of $0.960, offering a decent opportunity for accumulation. The stock has been corrected by ~10.45% and ~12.44% in the past one month and three months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ average EV/Sales multiple, considering the improving leverage position and decent liquidity, etc. For the purpose of valuation, peers such as GUD Holdings Ltd (ASX: GUD), ARB Corp Ltd (ASX: ARB) and PWR Holdings Ltd (ASX: PWH) have been considered. Considering the expected upside in valuation, supply of carbon fibre wheels, decent performance in Q1FY22, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.965, as on 21 December 2021, 12:05 PM (GMT+10), Sydney, Eastern Australia.

CBR 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.

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