Bapcor Limited

BAP Details

Partnership Agreement: Bapcor Limited (ASX: BAP) is engaged in the distribution of automotive aftermarket parts.  As announced on 17 January 2021, the company’s Autobarn has entered a partnership agreement with Beam Communications Holdings Ltd, wherein it will sell ZOLEO Global Satellite Communicator at its outlets across Australia. The said agreement will increase the number of Australian retail outlets by more than four-fold in the 2022 March quarter to around 440 locations.

Key Updates:

• On 6 December 2021, BAP has appointed Chair Margie Haseltine as its interim Executive Chair and CFO Noel Meehan as Acting Chief Executive Officer.
• As announced on 10 December 2021, BAP has successfully refinanced its $270 million three-year debt facilities, which were due to mature in July 2022.

Solid Start to FY22: The company commenced FY22 with solid momentum, evident by flat group revenue in Q1FY22 vs Q1FY21. The result indicates the resilience and non-discretionary nature of its businesses.

FY21 Financial Highlights: For the year ended 30 June 2021, the company recorded revenue amounting to $1,762 million as compared to $1,463 million in FY20. EBITDA for the year amounted to $279.5 million against $217.1 million in FY20.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to a risk arising from the rising market share of its peers in the industry. In addition, BAP’s performance could also be impacted by failure by counterparties in fulfilling their obligations.

Outlook: For FY22, the company is targeting to deliver pro forma earnings at least at the level of FY21. The 1HFY22 is expected to be softer than the 1HFY21. However, 2HFY22 is likely to be stronger than 2HFY21. BAP has scheduled to release 1HFY22 results on 9 February 2022.

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 is trading below its 52-week low-high average of $6.170 - $8.600, respectively. The stock has been corrected by ~2.98% and ~15.69% in the past one and three months, respectively. 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’ average P/E multiple, considering the COVID-19 uncertainties and high debt to equity. For the purpose of valuation, peers such as ARB Corp Ltd (ASX: ARB), GUD Holdings Ltd (ASX: GUD), Autosports Group Ltd (ASX: ASG), and others have been considered. Considering the expected upside in valuation, partnership agreement, growing revenue and EBITDA, current trading level, optimistic outlook, we recommend a ‘Buy’ rating on the stock at the current market price of $6.760, as on 25 January 2022, 11:50 AM (GMT+10), Sydney, Eastern Australia.

BAP Daily Technical Chart, Data Source: REFINITIV

Temple & Webster Group Ltd

TPW Details

Substantial Holder: Temple & Webster Group Ltd (ASX: TPW) is engaged in the online retailing of furniture and homewares. Recently, Credit Suisse Holdings (Australia) Limited has become an initial substantial holder in the company with a voting power of 5.29%.

FY21 Highlights:

• During FY21, the company witnessed record growth of 85% and 141% in revenue and EBITDA to $326.3 million and $20.5 million, respectively, in spite of the challenges posed by the COVID-19 pandemic.
• The company commenced FY22 with a YoY growth of 49% in revenue for the period 1 July – 27 August 2021.

Revenue & EBITDA Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s operational and financial performance could be impacted by the rising market share of competitors and changing sentiments of the consumers. TPW is exposed to a risk arising from the uncertainties arising from the COVID-19 pandemic.

Outlook: Looking forward, the company would continue its reinvestment strategy, investing in growth areas of the business to improve its online market leadership position.

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 TPW is trading below its 52-week low-high average of $7.590 - $15.000, respectively. The stock has been corrected by ~19.59% and ~34.15% in the past one month and three months, respectively. 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 disruptions and high debt to equity ratio. For the purpose of valuation, peers such as Kogan.com Ltd (ASX: KGN), Adore Beauty Group Ltd (ASX: ABY), Mydeal.Com Au Ltd (ASX: MYD) and others have been considered. Considering the expected upside in valuation, growing revenue, strong start to FY22, decent outlook, and current trading levels, we recommend a ‘Buy’ rating on the stock at the closing price of $8.080, down by ~2.651% as on 25 January 2022.

TPW Daily Technical Chart, Data Source: REFINITIV 

New Zealand King Salmon Investments Limited

NZK Details

1HFY22 Financial Highlights:  New Zealand King Salmon Investments Limited (ASX: NZK) is mainly involved in the farming, processing, and sale of premium salmon products. For six months period ended 31 July 2021 (1HFY22), the company reported revenue amounting to NZ$80.1 million against NZ$67.0 million in 1HFY21. This indicates clearance of excess inventory and sales recovery.

• Sales volume for the half-year stood at 3,629 tonnes as compared to 2,745 tonnes in 1HFY21.
• Statutory loss for the period amounted to NZ$5.6 million, which was in line with 1HFY21.
• The company is expecting harvest volumes of over 4,000 tonnes delivering the usual premium prices in 2HFY22.

Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company has experienced a major impact on its financial health due to the pandemic. The business is also exposed to supply chain risk, which is mainly caused by unpredictable or misunderstood customer demand, interruptions to the flow of products.

Outlook: For FY22, the company is likely to report Pro-forma EBITDA is in the range of NZ$10.5 million to NZ$12.5 million.

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 is trading at par to its 52-week low level of $1.180, offering a decent opportunity for accumulation.  The stock has been corrected by ~9.02 % 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, considering the COVID-19 disruptions and inefficiency in generating profits. For the purpose of valuation, peers such as Woolworths Group Ltd (ASX: WOW), Inghams Group Ltd (ASX: ING), Costa Group Holdings Ltd (ASX: CGC), and others have been considered. Considering the expected upside in valuation, decent liquidity position, low debt to equity, decent 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 $1.180 as on 25 January 2022.

NZK 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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