Baby Bunting Group Limited

BBN Details

Insights of 1HFY22: Baby Bunting Group Limited (ASX: BBN) is a specialty retailer of baby goods, which is mainly catering to parents with children from newborn to three years of age. During 1HFY22, the company achieved exceptional results despite some challenging conditions, evident by decent growth in sales and gross profit.

Financials (Source: Analysis by Kalkine Group)

Key Risks:  The company’s operational and financial performance could be impacted by the rising market share of peers in the industry in which it operates. In addition, the business could also be affected by the instability of demand and supply.

Outlook:

• As on 9 February 2022, the YTD comparable store sales growth was 6.1%. The online sales (including click and collect) were strong and were up 30.0% for the previous 6 weeks against pcp.
• Looking forward, BBN would be focused on leveraging the new headless e-commerce architecture and to driving loyalty membership. In addition, it intends to open 2 to 3 stores in 2HFY22.
• The company would also assess the $5.1 billion baby goods market for future long-term growth opportunities, which is related to its current $2.5 billion addressable markets.

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 BBN is trading near to its 52-week low level of $4.560, offering a decent opportunity for accumulation. The stock has been corrected by ~12.38% in the past one month. The stock has been valued using a P/E multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ median P/E multiple, considering COVID-19 uncertainties and high debt to equity ratio, etc. For the purpose of valuation, peers such as Lovisa Holdings Ltd (ASX: LOV), Accent Group Ltd (ASX: AX1), and Super Retail Group Ltd (ASX: SUL) have been considered. Considering the expected upside in valuation, growing sales, rising earnings, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $4.570, as on 04 March 2022, 12:20 PM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BBN Daily Technical Chart, Data Source: REFINITIV  

Cettire Limited

CTT Details

Entry into China: Cettire Limited (ASX: CTT) is a global online retailer which offers a large selection of in-demand personal luxury goods via cettire.com. The company intends to enter the Chinese online luxury market, which is expected to be the largest market for personal luxury goods by 2025 globally. For this, the company entered a partnership with a leading Chinese e-commerce platform, “JD. Com”, which has more than 550 million active customers and is the largest online retail platform in China.

1HFY21 Operational and Financial Summary: During 1HFY22, CTT delivered exceptional results and made investments in its brand, customer acquisition and further technology development to strengthen its rapidly expanding market position. CTT witnessed a growth of ~208% in active customers to 209k.

Financials (Source: Analysis by Kalkine Group)

Key Risks: CTT operates in a very competitive environment: hence the rising market share of peers could impact its business growth. In addition, the company is exposed to a more complex regulatory environment; any failure could lead the business to fines, penalties, etc.

Outlook: The company is optimistic about tremendous growth opportunities in the markets such as the US, UK and Australia in the near future. During FY22, the company would be focused on maximising revenue by further investing in brand and customer acquisition.

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 CTT is trading below its 52-week low-high average of $0.885 - $4.805, respectively. The stock has been corrected by ~32.78% in the past one month. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering the COVID-19 uncertainties and negative net margin, etc. For the purpose of valuation, peers such as Lovisa Holdings Ltd (ASX: LOV), Adore Beauty Group Ltd. (ASX: ABY), Redbubble Ltd. (ASX: RBL), and others have been considered. Considering the expected upside in valuation, rising topline and active customers, partnership with JD. Com, optimistic outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $1.980, down by ~9.175% as on 04 March 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

CTT 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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