Ansell Limited

ANN Details

FY21 Dividend Announced: Ansell Limited (ASX: ANN) manufactures protective industrial and medical gloves. ANN operates two key segments, Industrial and Healthcare, with operations across North America, Latin America, EMEA, and the Asia Pacific. The company recently paid a final dividend of $0.5944 (US$0.436) for the year ended on 30 June 2021. ANN also has a Dividend/Distribution Reinvestment Plan (DRP) applicable for shareholders who are residents of New Zealand, Australia, or the UK, offered at $37.05 per share (US$27.18 per share) under the DRP.

Key Appointments: ANN has recently appointed Mr Rikard Froberg to President, Industrial Global Business Unit (IGBU), from 1 September 2021. Mr. Neil Salmon will move in as the new MD and CEO from the same date.

FY21 Highlights:

• Revenue Growth: The company posted revenue growth of 25.6% YoY to US$2,026.9 million for FY21.
• NPAT Increase: The NPAT registered an increase of 57.5% YoY to US$246.7 million in FY21
• EPS Growth: The EPS rose to US$1.92 per share, representing a 60% growth on a pcp basis.
• Increased Gearing: The gearing (net debt to shareholders’ equity) rose to 17.9% in FY21 compared to 12.3% in FY20.
• Liquidity Stance: ANN maintains US$464.2 million of robust liquidity constituting cash and undrawn bank facilities as of 30 June 2021.

The Trend of Sales & Profit Attributable from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces COVID-19 manufacturing disruptions, particularly in Malaysia and Sri Lanka. ANN witnessed global supply chain issues due to sea freight imbalances, shortage of inputs and consumables.

Outlook:

• The company expects to continue leading the surgical gloves segment globally on the back of close distribution partnerships and a robust end-user base. Also, given its diversified portfolio in various markets, ANN expects persistent demand for Surgical, Mechanical, Life Sciences and Single -Use gloves.
• ANN is innovating smart gloves with sensors to alert the user of the potential risk of chemical penetration compared to traditional gloves.
• ANN anticipates the net interest expense between $20.0-$21.0 million and the effective tax rate in the range of 22.0-23.0%. The company expects higher software investments in FY22 and treat it as an immediate expense. As a result, ANN forecasts EPS for FY22 in the range of 175-195 cents per share.
• The company will hold its upcoming Annual General Meeting (AGM) on 11 November 2021.

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 ANN gave a negative return of 15.98% in the past month and a negative return of 19.17% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $33.230 - $44.070. The stock has been valued using P/E multiple-based illustrative relative valuation method 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 P/E, considering its lower net cash from operating activities, higher net debt in FY21, and the continuing COVID-19 cases in South-East Asia, the expected shipping delays, increased freight costs in FY22. For the purpose of valuation, few peers like Australian Pharmaceutical Industries Limited (ASX: API), Healius Limited (ASX: HLS), Sigma Healthcare Limited (ASX: SIG), and others have been considered. Considering the current trading levels, decent financial performance in FY21, continuous demand for the surgical gloves segment and EPS forecast in FY22, and valuation, we give a ‘Buy’ rating on the stock at the current market price of $34.170 as on 21 September 2021, 10:49 AM (GMT+10), Sydney, Eastern Australia.

ANN Daily Technical Chart, Data Source: REFINITIV  

IDT Australia Limited

IDT Details

Upcoming AGM Uppdate: IDT Australia Limited (ASX: IDT) supplies products (APIs, finished dosages forms), research, and development in the pharmaceutical industry, including medicinal cannabis. The company will hold its Annual General Meeting on 16 November 2021 at 10.00 AM (AEDT).

Australia Strategy Highlights: 

• Following IDT’s recent agreement with The Australian Government Department of Health (Health), the company is close to completing the sterile activities for its Boronia sterile manufacturing facilities. The firm awaits obtaining a sterile manufacturing licence from the Therapeutic Goods Administration (TGA).
• IDT awaits the Government’s decision on the proposal submission for funding and setting up an onshore mRNA manufacturing capability (ATM).
• The company is in talks with the Monash Institute of Pharmaceutical Sciences (MIPS) & Victorian Government to provide manufacturing services (cGMP certified) for developing the mRNA COVID-19 receptor binding protein vaccine candidate.

FY21 Highlights:

• Revenue Growth: IDT posted an increase of 19.5% YoY to $16.93 million in FY21.
• NPAT Increased: The Net Profit After Tax rose to $2.10 million, depicting a rise of 209.6% on a pcp basis.
• Liquidity & Debt: The company exited FY21 with a cash balance of $6.9 million and borrowings of $766,000 as of 30 June 2021.
• Net Cash Inflows: The company recorded a net operating cash inflow of $370K in FY21 versus net cash outflows of $1.91 million in FY20 owing to higher customer receipts.

Total Revenue & Net Income from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces foreign exchange rate changes, supply chain dependencies, a complex and stringent regulatory regime in the cannabis business.  

Outlook:

• IDT aims to establish the Boronia campus for medicinal cannabis product manufacturing and expand its base contract development in FY22.
• IDT expects to begin the initial clinical trial to develop an mRNA COVID-19 vaccine candidate in Q4CY21.
• The company awaits stability trials' results to launch its cGMP medicinal cannabis flower-in-bottle product for distribution in Australia. It will undertake new medicinal cannabis product development activities for developing several new APIs and finished dosage forms.
• IDT will continue talks with the Australian Government, Monash University, and other regulators for the sovereign manufacture of various therapeutics and COVID vaccines.

Stock Recommendation: The stock of IDT gave a positive return of 229.41% in the past nine months and a positive return of 211.11% in the past year. The stock is currently trading above the 52-weeks’ average price level band of $0.150 -$0.755. On a TTM basis, the stock of IDT is trading at a price to book value multiple of 8.0x lower than the industry (Healthcare) median of 13.3x, thus seems undervalued. Considering the growth in revenue, NPAT, and net cash inflows in FY21, decent project pipeline, valuation on a TTM basis, and the associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.560 as on 21 September 2021, 10:51 AM (GMT+10), Sydney, Eastern Australia.

IDT 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.

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