Redbubble Limited

RBL Details

Change of Company Secretary: Redbubble Limited (ASX: RBL) facilitates an online marketplace for the sale and purchase of art and designs on a range of products sold by independent artists. As per a recent announcement, the company has appointed Mr Martin Bede as its new Australian- resident Company Secretary, following the resignation of Mr Paul Gordon from the position.

YTD 31 March 2021 Performance Update: The company delivered decent performance during the period.

• Marketplace revenue grew by ~85% to ~$456 million when compared to the pcp.
• Gross profit was at ~$184 million, an increase of ~100% on the pcp.
• EBITDA stood at ~$51 million, compared to a loss of $2 million in FY20.
• The closing cash balance stood at ~$102 million as of 31 March 2021.
• Operating cashflows improved to $54 million during the period, compared to $6 million in FY20.

Trend in Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: The company is dependent on its technological platform for facilitating sales and purchases. Any adverse impact on it might impact the profitability of the company.

Outlook: The company plans to achieve over $1.5 billion in GTV, $1.25 billion in marketplace revenue and $250 million in artist revenue in the medium term. It will release its full year FY21 results on 19 August 2021.

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: As per a recent update, Kayne Anderson Rudnick Investment Management, LLC, Virtus Investment Advisers, Inc., and their associates have undergone a change of shareholding in the company and increased its voting power to 9.14%. As per ASX, the stock of RBL is trading close to its 52-weeks’ low level of $3.00. The stock of RBL gave a negative return of ~6.13% in the past one year and a negative return of ~10.26% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at some discount to its peers’ median, considering the increase in payables and inherent technological risks. For the purpose of valuation, few peers like Kogan.com Ltd (ASX: KGN) Booktopia Group Ltd (ASX: BKG), and Zebit Inc (ASX: ZBT) have been considered. Considering the expected upside in valuation & current trading levels, increase in marketplace revenue, a turnaround in EBITDA performance, decent cash balance and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $3.010, as on 18 August 2021, 10:00 AM (GMT+10), Sydney, Eastern Australia.

RBL Daily Technical Chart, Data Source: REFINITIV 

Mosaic Brands Limited

MOZ Details

Q4FY21 and FY21 Performance Update: Mosaic Brands Limited (ASX: MOZ) is engaged in the retailing of women’s apparel and accessories. The company has recently updated about its performance in Q4FY21.

• The underlying EBITDA was in line with the guidance range at ~$48 million for FY21.
• Online sales grew by ~19% to ~$111 million in FY21.
• The company reported net margin of 59.4% in FY21, compared to 47.6% on the pcp period.
• The comp store growth in Q4FY21 stood at over 27.9 %, and comp gross margin grew by ~133% on the pcp period, as there was a rebound of consumer sentiments during the period.
• There was a cash inflow of ~$53 million in Q4FY21 from operating activities.
• Debt reduced by ~64% to $31.5 million as of the quarter-end, compared to $86.5 million during the prior corresponding period end.
  

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The prevalence of the COVID-19 pandemic poses a risk to the company's operations, and any further lockdowns might impact the performance of the company.

Outlook: The company has entered FY22 on the back of solid momentum in sales performance. However, the recent lockdowns have impacted in store sales in the short term. It seems to be well-positioned to address the business needs once the lockdown ceases and there is an advancement of vaccine roll-out.

Valuation Methodology: EV/EBITDA 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: As per ASX, the stock of MOZ is trading below its average 52-weeks’ levels of $0.455-$1.190. The stock of MOZ gave a negative return of ~29.28% in the past one year and a negative return of ~18.85% in the past three months. The stock has been valued using an EV/EBITDA multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ average, considering the potential impact of COVID-19 on the business and decrease in the current ratio. For the purpose of valuation, few peers like Myer Holdings Ltd (ASX: MYR), Michael Hill International Ltd (ASX: MHJ), Dusk Group Ltd (ASX: DSK) have been considered. Considering the expected upside in valuation & current trading levels, growth in online sales, reduction in debt levels, expected economic recovery and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.48, down by ~3.031% as on 18 August 2021.

MOZ 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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