WNX Details

Q1FY22 Performance and Business Developments: Wellnex Life Limited (ASX: WNX) is engaged in the sale and distribution of health and wellness products.

• Cash Inflow from Customers: Receipts from customers in Q1FY22 stood at $4.85 million ($149,000 PcP) with additional purchase orders receipt amount to $1.35 million amidst the launch of new brand.
• Operating Cash Outflow: Net cash loss from operating activities stood at $319,000, including the one-off expenses of around $200,000 linked to the acquisition of Brand Solutions Australia.
• Financial Position: WNX holds strong balance sheet position with net cash available of $3.6 million with around $4 million in inventory and $2.5 million inflow raised post-quarter.
• Launch of New Brands: The launch of three innovative and new brands, namely Wakey Wakey and The Iron Company, to be available in grocery and pharmaceutical chains in November. The launch will continue to increase WNX’ presence in the wellness and health market to drive improved margins.
• Licensing Agreement: WNX entered into a licensing agreement with Performance Inspired, an established sports supplement brand. WNX has secured ranging for Performance Inspired in New Zealand retail outlets and Chemist Warehouse’s Australia to develop strong online portal.

Cash Balance, Analysis by Kalkine Group

Key Risks and Challenges

• Consumer Sentiments: WNX is exposed to a risk arising from changing consumer sentiments, which may impact top line significantly.
• Regulatory Risks: Operating in wellness and health market, WNX’ products are subject to approval from food and drug administrations in all jurisdictions.

Outlook: With the launch of new brand, WNX holds potential to diversify top-line across multiple revenue streams. Licensing agreement with Performance Inspired may deliver strong market presence to WNX. The acquisition of Brand Solutions Australia (BSA) held a transformative impact on company’s financial and operational performance.

Stock Recommendation: For Q1FY21, WNX witnessed favourable incline in cash receipts on the back of multiple purchase orders and store commencement in November. Furthermore, WNX is assisting the Corio Bay Dairy Group’s administrator to recover around $3.7 million in preferential credit payments. With $2 million redemption of convertible notes in Q1FY22, WNX holds potential to issue new convertible notes at more favourable terms, raising around $2.5 million post Q1FY22. The stock of WNX gave a 1 month and 3 months return of ~+6.061% and ~-27.586%, respectively. The stock is currently trading lower than the 52-weeks’ average price level band of $0.097 - $0.170. Considering the current trading levels, expanded portfolio via BSA and Pharma Solutions Australia acquisitions, revenue growth estimated & launch of new brands in Q1FY22, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.100, as on 05 November 2021, at 11:36 AM (GMT+10), Sydney, Eastern Australia.

Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks of regulatory refusals, COVID-19 uncertainties, and changing consumer sentiments.

WNX Daily Technical Chart, Data Source: REFINITIV

Note: The purple line reflects the RSI (14-day period)

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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