NRW Holdings Limited

NWH Details

New Contract Awarded to Primero: NRW Holdings Limited (ASX: NWH) operates in Civil, Mining, Drill and Blast, and Mining Technologies segment and heat treatment services, as well as mining equipment solutions in Australia. The company’s wholly owned subsidiary Primero Group has been awarded new contracts total of circa $155 million from its key clients. These contracts will help the company in expanding the capacity of the group across multiple commodities and services.    

H1FY21 Financial Performance:

• The company has recorded an increase in group revenue by 44% to $1,168 million in H1FY21, compared to $808.7 million in H1FY20, driven by BGC contract acquisition and continued organic growth across the business.
• NWH reported an improved group EBITDA by 28% to $132.8 million against $103.8 million in H1FY20
• However, the company incurred a decline in statutory net profit by 13.11% to $29.04 million in H1FY21 versus $33.42 million in H1FY20, impacted due to COVID-19 pandemic.
• The cash position of the company stood at $171.4 million as of 31 December 2021 and recorded a reduction in net debt to $96.5 million.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Geological Risk- The company is exposed to geological risks that might have an impact on finances. Therefore, the company should have a regular check from geologists.
• Impact of COVID-19 pandemic- The company has a significant impact on its operation due to low demand and economic slowdown that has impacted the company's operations and still the uncertainty prevails.

Outlook: The company is expecting growth due to the increasing expenditure on infrastructure projects at the state and federal level, resulting in a strong demand for commodities. Further, the company is estimating revenue between $2.2 billion to $2.3 billion for FY21, due to tenders and prospects are in pipeline.

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 NWH is trading below the average 52-weeks' levels of $1.360-$3.190. The stock of NWH gave a positive return of ~11.20% in the past three months and a negative return of ~35.86% in the past six months. The stock has been valued using an EV/Sales multiple-based illustrative and have arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average, considering the uncertainty over COVID-19 impact and lower net margin. For the purpose of valuation, few peers like Macmahon Holdings Ltd (ASX: MAH), SRG Global Ltd (ASX: SRG), Intega Group Ltd (ASX: ITG), have been considered. Considering the healthy balance sheet, robust revenue, orders in the pipeline, increasing demand, we recommend a ‘Buy’ rating on the stock at the market price of $1.697, as on 13^th August 2021, 3:45PM (GMT+10), Sydney, Eastern Australia.

NWH Daily Technical Chart, Data Source: REFINITIV

Humm Group Limited

HUM Details

Strategic Partnership with Metcash: Humm Group Limited (ASX: HUM) provides financial services that operate through Buy Now Pay Later, New Zealand Cards, Australia Cards, and Commercial Leasing segments in Australia, New Zealand, and Ireland.

• The company has announced a partnership with Metcash’s Independent Hardware Group Mitre 10 and Home Hardware that offer BNPL to short and medium businesses.
• The company has entered into a partnership between bundll and Velocity Frequent Flyer, expect a shifting demand from retail, finance and loyalty partners to offer BNPL services.
• Humm has come into a partnership with LG Energy Solution to provide Virtual Power Plant (“VPP”) solutions and in addition, appointed diamond Energy as an electricity retailer.

Q4FY21 Financial Performance:

• The company has reported an uptick in transaction volume by 57.3% to $774.9 million in Q4FY21, compared to $492.5 million in Q4FY20, driven by a strategic diversified portfolio.
• Humm group has recorded an increase in the customer of 2.7 million as of 30 June 2021, increased by 19.7% on a pcp basis.
• The company gained 1,362 new merchants integrated across Australia and New Zealand in Q4FY21 that also includes strong growth in key verticals of health, luxury retail, home improvement, and automotive.

Net Income (Source: Analysis by Kalkine Group)

Key Risks:

• Capital Adequacy- The company is exposed to capital adequacy risk that could impact the customer-centric offering and operational activity.
• Impact of COVID-19 pandemic- The economic slowdown that leads to mounting in NPA’s that could impact the company’s earning and still, the uncertainty prevails.

Outlook: For FY21, the company expects to report a cash NPAT of $68 million, demonstrating an increase of 121% on FY20. The company is planning to release its full-year result FY21 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: The stock of HUM is trading below its average 52-weeks' levels of $0.840-$1.390. The stock of HUM gave a positive return of ~2.11% in the past three months and a negative return of ~17.77% in the past one year. The stock has been valued using an EV/Sales multiple-based illustrative and have arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ median, considering the economic recovery and decrease in debt-to-equity ratio. . For the purpose of valuation, few peers like Credit Corp Group Ltd (ASX: CCP), Money3 Corp Ltd (ASX: MNY), Eclipx Group Ltd (ASX: ECX), have been considered. Considering the diversified portfolio, strategic partnership, optimistic outlook and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.955, down by ~1.547% as on 13 August 2021.

HUM Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: 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. 

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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.