Zoono Group Limited

ZNO Details

Business Update: Zoono Group Limited (ASX: ZNO) develops, manufactures, and distributes antimicrobial solutions. As of 12 May 2021, the market capitalisation of ZNO stood at ~$111.68 million. During Q3FY21, ZNO’s main product Zoono Microbe Shield (ZMS) has satisfyingly tested against human Coronavirus 229E in the US. The company appointed new distributors in Luxembourg, Norway, Greece, and Poland, with orders pending in each of them. It has made the first order shipment to Russia. It has been invited by Microsoft to become an authorised supplier to its office network. Starting with the Redmond Campus in the US as the first site, ZNO will cover other US locations as its staff joins in May. ZNO has partnered with Boeing to provide its products to airlines worldwide and its product ZMS has met the criteria for use in aircraft interiors. The company presented its products and technology to the Upper House of the French Parliament. ZNO’s sales to Fine Hygiene Group LLC (FHH), a UAE based company, is growing and estimated at US$7 million over the next 6 months.

Q3FY21 Cash Flow from Operating Activities Highlights (Source: Company Reports)

Key Risks: The company faces the impact of repeated lockdowns in the UK, Europe, delays in meeting the US standard for registrations. It also faces the risk of regulatory restrictions imposed on its product claims in the US and the UK, and front loading of orders by customers at the onset of the pandemic.

Outlook: The company estimates FY21 revenues to be in the range of $26-$31 million. In France, ZNO witnessed interest in the placement of its brands in the public spaces and buildings in Paris. It foresees France as a key market for its products and as a gateway into the EU. It is also warehousing considerable product in France to foster quick delivery spanning Europe. In China, with the presence of ZNO’s 100% owned subsidiary, taking orders directly, the company estimates the market to be a bigger contributor over the twelve months.  

Stock Recommendation: The stock of ZNO gave a negative return of 30.31% in the past three months and a positive return of 52.87% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.585. The stock of ZNO has a support level of ~$0.508 and a resistance level of ~$0.801. On a TTM basis, the stock of ZNO is trading at an EV/EBITDA value multiple of 4.7x lower than the industry (Personal & Household Products & Services) median of 9.7x, thus seems undervalued. Considering the current trading levels, decent results of Q3FY21, new supply contracts signed in Europe, growth expected in China and France, higher sales orders forecasted from FHH, addition of clients such as Microsoft and Boeing, valuation, and related risks of delays and lockdowns caused by the pandemic, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.655, down by 3.677% on 12 May 2021.

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

Advance Nanotek Limited

ANO Details

Grant of TGA Licence: Advance Nanotek Limited (ASX: ANO) is a producer of zinc oxide dispersions, zinc oxide powder (together ZinClear), and aluminium oxide powder (Alusion) for the personal care industry. As of 12 May 2021, the market capitalisation of ANO stood at ~$239.95 million. On 22 April 2021, ANO announced that Director Geoff Acton now holds 381,929 shares directly and 7.5K shares indirectly after an off-market transaction. In a recent announcement, ANO informed regarding the grant of manufacturing licence from TGA for 81 Shettleston Street, Rocklea. With this approval, ANO can now manufacture a range of vegan, zinc-based products in Brisbane. All products manufactured will be non-nano, gluten-free and preservatives free.

A Look at the 1HFY21 Results: The company posted revenue of 3.43 million, down by 69.63% YoY in 1HFY21. It has completed the installation of a new dispersion line to produce bulk intermediate and other dispersions funded from its current cashflow during the reporting period. The company has developed 15 new bulk intermediate products, organic-based, including a zinc-based sunscreen. The company is progressing well on its listing on NASDAQ.

ANO reported an NPAT of $225k down by 93.32% YoY in 1HFY21. Its net cash flows from operating activities stood at $1.92 million versus $919,000 in 1HFY20. It held a cash and cash equivalents balance of $400,000 as of 31 December 2020.

1HFY21 P&L Highlights (Source: Company Reports)

Key Risks: ANO has faced the severe impact of lockdowns, travel restrictions, lower sales due to the pandemic situation. The company also faces risks of delayed grant of approvals for its new facilities, capacity extensions and new product introductions.

Outlook: ANO will begin the manufacturing of its recently TGA approved vegan zinc-based products in Brisbane. It will actively undertake sales promotion of these products globally via its network. It forecasts the revenue impact of these products on its performance in FY22. It is also developing a premium range of dispersions based on its present product offering. ANO is processing draft documentation for circulating to its shareholders later in 2021 regarding its NASDAQ listing.

Stock Recommendation: The stock of ANO gave a negative return of 6.10% in the past six months and a positive return of 10.19% in the past nine months. The stock is currently trading closer to its 52-weeks’ average price level of $2.92-$5.94. The stock of ANO has a support level of ~$3.722 and a resistance level of ~$4.441. On a TTM basis, the stock of ANO is trading at a price to book value multiple of 8.5x higher than the industry (Personal & Household Products & Service) median of 1.8x, thus seems overvalued. Considering the fall in revenue and NPAT in 1HFY21, the severe impact of COVID-19 lockdowns on the company’s operations and financials, valuation on a TTM basis, we give an ‘Avoid’ rating on the stock at the current market price of $4.00 on 12 May 2021. We look forward to further developments with regards to business activities and financial performance.

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

Note: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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