Evolve Education Group Ltd

EVO Details

Evolve Education Group Ltd (ASX: EVO) is one of the top players in providing early childhood education in New Zealand and Australia. As of 16 July 2021, the market capitalisation of the company stood at ~A$122.05 million.

FY20 Results Highlights

Change in Balance Sheet Date: The company has changed its balance sheet date to 31 December as compared to 31 March earlier during CY20, hence, its audited results for FY20 include the performance for the 9 months from 1 April 2020 to 31 December 2020.

Generated a Revenue of $102.6 million in FY20: The company has generated revenue of $102.6 million in FY20 (i.e., for the 9 months ended 31 December 2020) compared to the revenue of $140.6 million achieved during the 12 months ended 31 March 2020.

Improved Profitability: Meanwhile, the company has reported an improvement in its underlying EBITDA (pre-IFRS 16) during the period to $15.7 million from $8.2 million in FY 31 March 2020. As a result, the company reported a net profit after tax of $7.6 million during the period compared to the net loss of $13.30 million reported in FY 31 March 2020.

Stabilization in Occupancy Level: Meanwhile, EVO has witnessed stabilization in occupancy level following the modification of its board in September 2019. Further, it has streamlined the functions of its support office along with lowering the fees of the board and fee discounting. Besides, it has further deepened its presence in Australia with the acquisition of 10 centres in the last quarter of 2019.

Financial Snapshot (Source: Company Reports)

Trading Update

As per the press release dated 8 June 2021, the company updated that its Australian operations continue to post a very strong performance with the occupancy in the southern states and Queensland  coming at 87.8% and over 80%, respectively for the week ending 23 May 2021. However, the occupancy in New Zealand stood at around 70% for the week ending 23 May 2021.

Key Risks

The operations of the company are exposed to various financial risks that include market risk as well as credit and liquidity risks. Besides, it is susceptible to the health and safety risks of children.

Outlook

The company has a healthy liquidity position with cash on hand of around NZ$48 million. With healthy cash & cash equivalents and capital raise recently completed, the company  is mulling at further acquisitions opportunities.

Meanwhile, EVO has settled all centre acquisitions that it has announced on 5 March 2021. Currently, EVO has 115 early education centres in New Zealand and 20 in Australia. Besides, it plans to start paying quarterly dividends from September 2021 for FY20.

EVO continues to focus on material cost savings through streamlining centre-based and support office costs. Meanwhile, the company has guided achieving underlying EBITDA between NZ$16 million and NZ$18.5 million in FY21 and between NZ$23 million and NZ$25.0 million in FY22.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been in a downtrend and in the process, it made a low of $0.710 before finally closing at $0.740 for the ongoing week. The technical indicator RSI with a reading around 28 suggests weak momentum for the stock while it is in the oversold zone.

Going forward, the stock may have resistance around the level of $0.850 whereas support could be around $0.690.

Stock recommendation

We have applied Price/Earnings Per Share based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a slight premium to Price/Earnings Per Share Multiple (NTM) (Peer Average) considering sustained robust performance of its Australian operations, rebound in its net earnings in FY20, business growth strategies, and decent balance sheet with a healthy liquidity position that will enable the company to tap both organic and inorganic growth opportunities.

Considering the aforementioned factors, we give a “Speculative Buy” recommendation on the stock at the current market price of A$0.740 per share, down by 3.268% on 19^th July 2021.

Vmoto Limited

VMT Details

Vmoto Limited (ASX: VMT) is the global electric two-wheel vehicle (EV) manufacturing as well as distribution company. It specialises in the high quality electric two-wheel vehicles which are manufactured from its own manufacturing facilities located in Nanjing, China.

Result Performance (Year Ended 31 December 2020 – FY20)

Total revenue of the company for the full year period stood at $61.0 million, an increase of 34% on previous year. In the twelve months period, the company sold 23,547 units of electric two-wheel vehicles, up 18% on FY 2019. EBITDA of the company for the period stood at $5.8 million, an increase of 102% on previous year. Net profit after tax stood at ~$3.7 million. Cash balance at the end of 31^st December 2020 stood at $15 million, with no bank debt.

Key Data (Source: Company Reports)

Recent Update:

Recently, the company signed a sponsorship and marketing agreement to supply scooters and exhibit its brands at the world class electric motorcycle racing event, FIM ENEL MotoE World Cup during the 2021-2023 seasons. As per the report, the European electric scooter and motoryclce market is of strategic importance to VMT and is estimated to grow to US$758.5 million by 2025 equating to the second-largest market after Asia Pacific.

Outlook:

The company is optimistic about the strength of its global growth strategy and, therefore, it expects similar levels of growth (in the absence of unforseen events) to be reported in FY21.

It continues to accelerate its strategy of selling high performance and high value electric two-wheel vehicles into global markets and continues to grow both its B2B and B2C distribution network globally. Meanwhile, it secured an order valued at ~$13 million from Greenmo Group. In addition, it is constantly seeking to penetrate various new markets including the world’s largest two-wheel vehicle market in India.

Key Risks:

The company is exposed to the risks like competition in the electric two-wheel vehicles industry as well as technological obsolescence.

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock on the first trading session of the ongoing week, gave close with 2.78% gain at $0.37. The technical indicator RSI with a reading around 42 and a curve at the end pointing up, suggests neutral to up momentum for the stock.

Going forward, the stock may have resistance around 20 periods SMA of $0.41 whereas support could be around the lower Bollinger band of $0.34

Stock Recommendation:

The company’s gross margin and net margin for FY20 stood at 24.0% and 6.0%, better than the industry median of 18.9% and 5.2%, respectively, implying decent fundamentals. ROE for FY20 stood at 14.9%, better than the industry median of 8.2%, implying that the company generated better return for its shareholders than its peer group.

Considering the aforesaid facts, and current trading level, we give “Speculative Buy” recommendation on the stock at the current market price of $0.370 per share, up by 2.777% on July 19, 2021.

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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