Noumi Limited (ASX: NOU)

NOU was formerly known as Freedom Foods Group Limited, it works in the FMCG sector and produces dairy and plant-based nutritional products, beverages and ingredients related to the health and fitness industries. Its market capitalisation stood at AUD 69.27 million as of 1^st March 2022.

Blue Diamond Growers Litigation: As per the recent news on 22^nd February 2022, the license agreement dispute related to manufacturing and distribution of Almond Breeze products among NOU and Blue Diamond, finally settled. The group intends to raise ~$26.7 million from a further tranche of convertible notes to institutional investors and other eligible wholesale investors. It is also in the process of obtaining a bank guarantee for up to ~$25 million from the syndicated lenders which will be secured against sale of its investments in AFMH, expected to occur before 30^th June 2022. The total statutory loss arising from the legal suit worked out as ~$50.7 million, and the agreement removes all the restrictions on the company and its subsidiaries to sell nut-based beverages including MILKLAB in Australia or anywhere else with effect from today.

Financial 1HFY22 & Operational Updates –

As per its Half-Yearly Report released on 28^th February 2022, due to softer Q-o-Q results, the company reported a decrease of ~7% Y-o-Y in total revenue from continuing activities to ~$265.29 million. NOU’s net losses from continuing operations for the 1HFY22 increased by ~338% Y-o-Y to ~$65.85 million, constituting ~$50.7 million from the U.S. lawsuit. It had closed the period with a cash balance of $16.3 million, a decline of $8.0 million from last year.

The MILKLAB sales rose by ~19% in 1HFY22, where domestic sales increased by ~32% and export sales by ~64% covering 20 countries. The MILKLAB which constitutes ~21% of total NOU’s sales, has also launched its new Oat products in 1Q and ramping up in 2HFY22.

Key Risks:

• COVID-19: The company is vulnerable to the COVID-19 and Omicron’s lockdowns across all geographies, which might affect employee’s availability and can lead to a shortage in the workforce, thereby hampering its operations.
• Supply Chain Disruptions: Due to COVID-19 and other factors, the company might face delays in domestic and international shipping and cause problems in functional efficiencies.
• Others: Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Technical Analysis: On a daily chart, NOU's prices have risen from its lower support levels and have started gaining an upside momentum after making a new 52-week low of AUD 0.240, indicating the possibility of an upside reversal hereon. The RSI (14-period) is placed in an oversold level at ~27.603, indicating a possibility of reversal from lower levels. Now an immediate support level for the stock is placed at $0.230 while the resistance level is at $0.280.

After considering its settlement of legal suit, increase in MILKLAB sales, current trading levels, the investors with a high-risk appetite might consider a ‘Speculative Buy’ position, incorporating the support and resistance as one of the tools while analysing the investment opportunity. The stock was analysed as per the current market price of $0.250, 10:30 AM (GMT+10), Sydney, Eastern Australia as of 1 March 2022. However, the risk levels are extremely high in view of the OMICRON’s disruptions, uncertainty involved in Milk industry, production capacity and sales related to its products.

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.

Daily Technical Chart – NOU

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 for 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 is 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 the 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 unless those persons comply with certain safeguards, procedures, and disclosures.

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.